[nagesh81]

Hi dineo2,

Regarding your question to whether you should buy call or put option , the following are the steps to be followed:-

1) First assess what could be the exchange rate in future (whether foreign currency is depreciating or appreciating against home currency)

Ex: – You are a uk company and you are expecting to receive usd in future and If today the exchange rate is 1pound =1.32 usd and in future if you are expecting the exchange rate to be 1 pound = 1.5 usd dollar

Then by having call option ex :- 1 pound =1.4 usd , you can still purchase @1.4 though the market price is 1.5 usd dollar.

A call option gives the buyer the right to purchase the foreign currency at the rate which is other than the market rate.

If the strike price rate is more than the market price rate, then lapse the option
If the strike price rate is less than the market price, then avail the option

Hope this gives clarity on your doubt.

[Author]

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