Moreover, Field Service Advice (FSA) 200025020 (issued prior to Notice 200381, which was modified and supplemented by Notice 2007-71) provided the following reasoning: Although the definition of a foreign currency contract provided in 1256(g)(2) may be read to include a foreign currency option contract
, the legislative history of the Technical Corrections Act of 1982, which amended 1256 to include foreign currency contracts, indicates that the Congress intended to extend [section] 1256 treatment only to foreign currency forward contracts that are traded on the interbank market.
The petitioner, Michael Napoliello, entered into two pairs of offsetting long and short foreign currency option contracts
held by an LLC of which he was the sole member.
dollar receivables or payables is a type of transaction risk which can be hedged using forward foreign exchange or foreign currency option contracts
. A forward contract is a mutually binding agreement between two parties to exchange a certain amount of one currency for a specific amount of another currency at a date or range of dates in the future.
* Notice 2003-81 offsetting foreign currency option contracts
: A party claims a loss on the assignment of a Sec.