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Hello,
I would like to know how to destinguish between call and put in currency option, what I know that we have to think in the currency other than the US Dollar, for example, if an US company has received an income of €20m , then this is a put option, means the company will sell the € in order to have its own currency which is the US $?Please correct me if I am wrong, because when I revised Q1 of Mar/Jun 2016, i have noted the opposit.
Thank you,
Regards,
KhadijaIt depends on what the contract currency is stated as.
If the contracts are quoted in $’s, then a call option is the right to buy $’s and a put option is the right to sell $’s. Which to choose depends on what currency the company is operating in and whether they are receiving or paying the other currency.
I do suggest that you watch my free lectures on foreign exchange risk management where all of this is explained (with examples).
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