Currency Options

F

Fintan

Registered User
Messages
205
Hi

I just talked to my bank manager about buying currency options ( i have a business account).

She rang the relevant department, they talked away for a few minutes and she then proceeded to try and sell me a forward contract.

After much explanation on my part, I explained that I didn't want a forward, but would much rather buy an american style call option.

So I was promised that someone would call me about it, lo and behold no telephone call.

Now I know the amount is small, I need to hedge about 40K sterling which in options terms is tiny. But it will be an on-going positon and will increase in size.

Has anybody here bought an option in Ireland? If so any advice in where, what, who?
 
Not sure if this is what u are looking for but id recommend :

www.forex.com few other sites around also.

Better rate when dealing with a market maker rather then a wholesale bank u should be able to trade for a cost of 3 pips. It should allow u to successfully hedge your position..

If i had known about this site before i bought a house abroad i would have made a lot of money It takes time knowledge is power....!
 
Hi Ecstatic

Thanks for the link, unfortunately forex.com only offers ordinary currency trading.

Im looking to buy some currency options, im having no luck with Irish banks, and have been mooching about online trying to find an alternative.

I was hoping someone here might have had this problem before and found a company that could help.

Cheers

Fintan
 
Hi Fintan

I assume that you will have to pay £40k for something in a few months?

I hate giving profits to the banks. They make a lot of money on forward sales. They make even more money on options.

Can you take the risk yourself? Sterling may rise or fall. It's a lot simpler and a lot more profitable, although a bit riskier. If you can handle a 10% fall, then you should not bother hedging or messing with options.

Brendan
 
Not really my speciality, but can you not take out a hedge on a site like delta index?



Delta Index is Ireland’s leading financial spread betting company. We offer Irish investors the opportunity to bet/trade on a wide portfolio of shares, indices and currencies.
Click to expand...
 
Thanks for all the responses

Saxobank seem to be the only people I can find who offer what I want.

Im hedging Euro / Sterling ( I earn money in euros and pay costs in sterling). Im trying to create a more natural hedge by getting more work in sterling, but that will take a long time.

I have been taking the risk myself and the euro keeps getting weaker which is eating into my profit margins.

My problem is I have to price a job about three months in advance, with no guarantee of getting the job. Hence why I would prefer an option instead of a forward.

I could use spreadbetting as suggested, but this causes call for margin requirements cash flow that I might not actually need.

I think the easiest thing to do is find a euro supplier
 
Sorry if this is a stupid question (I know bugger all about this) but couldn't you get the 3month hedged price for Euro/Sterling and price based on that but not actually buy the option. That way you have allowed for the variation based on the banks estimate without giving them their commission?
 
Purple thats a very good idea, its probably what I will have to end up doing

Cheers

Fintan
 
Fintan surely if you just buy a load of currency with a geared up ratio such as using saxo bank or forex then you essentially have hedged your risk.

If you believe it will go against you then buy now using saxo or forex.

So if you need 40k throw 2k to saxo or forex gear it by say 20 times its initially time. If the currency moves with you you make profit on your ramped up 40k investment.

If it moves against where you think its going it will improve your transaction when you actually buy the currency. I dont see the issue with using either way.

Hedging is to restrict your exposure & ensure you get at a price that can let you still produce a margin on your goods. Using hedging is not to make profit as its not your primary business.
 
ecstatic,

My problem is I can't gurantee that at expiration I actually need to buy currency, so using your example, if the rate moves against me I could be potentially stuck buying 40k worth of sterling I dont actually need, and thus making a loss + transaction costs.

Hence the emphasis on options instead.

Also im a little wary of saxobank as they dont make it explicity clear the margin requirements.

Also im well aware that trading can be used for hedging or speculative purposes, but thanks for pointing that out.
 
i assumed you were going to buy the currency at months end.

Once again assumption was incorrect..
 
www.xe.com may be able to offer you some options

(better rates than local banks some of the time at the very least (!) and some options to fix rates into the future)

I have signed up and it was a very efficient and professional process. Have not had an opportunity to use yet so can't vouch for that aspect.

They require a bank account number from which / to which money will move - I gave them an empty old deposit account and they were happy with that. An indepth scour of google did not raise any conerns about the company.

They have a demo account which lets you see the process of ordering or receiving currency in action (not real time so you can't use demo to compare rates with those of your friendly local bank)

I have no financial interest in this company.
 
aib do it don't they?

I rang them a while back about a put option for the polis zloty.

[broken link removed]

Alternatively as a previous poster said you can hedge it by using a spreadbetting company.
Although doing the option s better i suppose (depending on the premium) as that will allow u to benefit if the currency swing goes in ur favour.
 
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