Kaplan Mock exam

Hi Sir,

I encountered this question but still a bit confused on the answer: Section B (Keermen Co)

Which TWO of the following would be appropriate methods of minimising the foreign exchange risk on the future receipts from French customers if the MD’s expectations about the exchange rate are correct?

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Available Answers
Sell Euro denominated futures up front and buy back on close out. (1 Mark)
A put option on Euros. (1 Mark)
When Kermeen Co receives the Euros from the French customers, it will sell them to buy £.

Selling Euro denominated futures contracts up front on the invoice date of the transaction and buying them back on close out at (or around) the settlement date of the invoice would effectively fix the Euro sell price immediately. The close out of the futures contracts and the actual sale of the Euros received from the French customer would offset each other, removing the exposure to exchange rate movements between the invoice date and the settlement date.

A put option gives the right to sell a currency at a predetermined rate, so an option on Euros would give the right to sell Euros and would be appropriate here. A call option would give the right to buy Euros at a predetermined rate, but the Euros are being sold rather than bought so this option would not be appropriate.