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Calls

A call (or call option) is a right that allows its holder to purchase a certain quantity of foreign currency at a predetermined rate (called the strike price). In the market, most calls are known as “European”, meaning that the option can only be exercised on a predetermined date, called the exercise date. Other types of calls exist on the market (American or Asian), but we will confine ourselves here to European calls.
As a Call is a “right”, it gives the purchaser the possibility to purchase an amount of foreign currency at the exercise price and exercise date predetermined at the inception of the contract. This also means that the purchaser of the Call may, if the spot rate between the purchase of the option and the exercise date is favorable, not exercise the option and instead purchase the currency at the market rate, which is more favorable than the option’s exercise price.
A call therefore makes it possible to secure a purchase price at the worst possible rate while benefiting from a possible favorable evolution of the spot rate between the purchase date and the exercise date of the option.
To benefit from this right, the buyer pays a premium to the seller of the option. The amount of the premium will depend on several factors: the quantity of currency that the option allows to buy, the exercise price, the maturity and of course market parameters such as the spot rate and volatility.

Finally, it should be noted that the seller of the option has no choice: if the buyer exercises his right, the seller must execute and sell his currencies at the option’s strike price, independently of the market price.

Les Puts

If a Call is a right to buy, a right to sell is also available on the market, and this is the Put (or Put Option). A Put is a right that allows its holder to sell a certain quantity of currency at a predetermined rate (called the strike price). Like Calls, most Puts on the market are called “European”, i.e. the option can only be exercised on a predetermined date called the exercise date. Other types of Puts also exist on the market (American or Asian) but we will confine ourselves here to European Puts.
A Put being a “right”, it gives its purchaser the possibility to sell an amount of foreign currency at the exercise price and exercise date predetermined at the inception of the contract. This also means that the buyer of the put will be able in case of favorable evolution of the spot rate between the purchase of the option and the exercise date not to exercise his option, and rather to sell his currencies at the market rate, which is more favorable than the exercise price of the option.
A put thus makes it possible to secure a sale price at worst while benefiting from a possible favorable evolution of the spot rate between the purchase date and the exercise date of the option.
To benefit from this right, the buyer pays a premium to the seller of the option. The amount of the premium will depend on several factors: the quantity of currency the option allows to sell, the exercise price, the maturity and of course market parameters such as the spot rate and volatility.
It should be noted that the seller of the option has no choice: if the buyer exercises his right, the seller must execute and buy his currencies at the option’s strike price, independently of the market price.

Calls

A call (or call option) is a right that allows its holder to purchase a certain quantity of foreign currency at a predetermined rate (called the strike price). In the market, most calls are known as “European”, meaning that the option can only be exercised on a predetermined date, called the exercise date. Other types of calls exist on the market (American or Asian), but we will confine ourselves here to European calls.
As a Call is a “right”, it gives the purchaser the possibility to purchase an amount of foreign currency at the exercise price and exercise date predetermined at the inception of the contract. This also means that the purchaser of the Call may, if the spot rate between the purchase of the option and the exercise date is favorable, not exercise the option and instead purchase the currency at the market rate, which is more favorable than the option’s exercise price.
A call therefore makes it possible to secure a purchase price at the worst possible rate while benefiting from a possible favorable evolution of the spot rate between the purchase date and the exercise date of the option.
To benefit from this right, the buyer pays a premium to the seller of the option. The amount of the premium will depend on several factors: the quantity of currency that the option allows to buy, the exercise price, the maturity and of course market parameters such as the spot rate and volatility.

Finally, it should be noted that the seller of the option has no choice: if the buyer exercises his right, the seller must execute and sell his currencies at the option’s strike price, independently of the market price.

Les Puts

If a Call is a right to buy, a right to sell is also available on the market, and this is the Put (or Put Option). A Put is a right that allows its holder to sell a certain quantity of currency at a predetermined rate (called the strike price). Like Calls, most Puts on the market are called “European”, i.e. the option can only be exercised on a predetermined date called the exercise date. Other types of Puts also exist on the market (American or Asian) but we will confine ourselves here to European Puts.
A Put being a “right”, it gives its purchaser the possibility to sell an amount of foreign currency at the exercise price and exercise date predetermined at the inception of the contract. This also means that the buyer of the put will be able in case of favorable evolution of the spot rate between the purchase of the option and the exercise date not to exercise his option, and rather to sell his currencies at the market rate, which is more favorable than the exercise price of the option.
A put thus makes it possible to secure a sale price at worst while benefiting from a possible favorable evolution of the spot rate between the purchase date and the exercise date of the option.
To benefit from this right, the buyer pays a premium to the seller of the option. The amount of the premium will depend on several factors: the quantity of currency the option allows to sell, the exercise price, the maturity and of course market parameters such as the spot rate and volatility.
It should be noted that the seller of the option has no choice: if the buyer exercises his right, the seller must execute and buy his currencies at the option’s strike price, independently of the market price.