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If i have over-hedged then i have hedged too much. If the transaction is a Receipts, then i will be receiving too much and so the over hedge will be converted back as a payment. If it is under hedged then i haven’t converted enough and so i need to convert unhedged amount which will be received
Can you check whether i m right or not
Dear Sir,
How would I know whether I have to buy call option/put option, or have to sell call option /put option???For foreign currency options, you never sell an option – you buy either a call option or a put option depending on whether you will be receiving or paying foreign currency.
It is only with interest rate options that you might both buy and sell options in order to create a collar.
This is all explained in detail in my free lectures on foreign exchange risk management.
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