foreign currency option

Foreign currency option

An option that conveys the right (but not the obligation) to buy or sell a specified amount of foreign currency at a specified price within a specified time period.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Foreign Currency Option

An option contract giving the holder the right, but not the obligation, to buy (for a call) or sell (for a put) a futures contract on a certain currency with a given exchange rate on or before the expiration date (depending on the type of option). A foreign currency option effectively gives one the option to lock in an exchange rate on the currency in question if it moves in a favorable direction, while letting the option expire, worthless, if the currency does not move in the desired direction. This helps hedge an investor's foreign exchange risk.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

foreign currency option

The right to buy (a call option) or to sell (a put option) a foreign currency futures contract at a fixed price until a specified date.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Since settlement is not required with options, a foreign currency option would therefore not meet the definition of a foreign currency contract.
With a foreign currency option, it operates in the same manner as a stop loss.
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.
During the fourth quarter of 2002, the company recorded an unrealized loss on derivative instruments relating to foreign currency option contracts expiring in 2003 and entered into prior to year-end 2002.
"Foreign Currency Option Values," Journal of International Money and Finance, 2, 1983, pp.
Subsequently, the Commodity Futures Trading Commission (CFTC) commenced these proceedings alleging that the defendants were deceiving investors and causing them to receive false reports of their account status.(29) The district court granted CFTC's request for a temporary equity receiver(30) over defendants' argument that under the Treasury Amendment, the CFTC had no power to regulate OTC options in foreign currency.(31) When the district court ruled that Dunn's foreign currency option trades were subject to CFTC regulation, Dunn brought an interlocutory appeal to the Second Circuit.(32)
dollar receivables or payables is a type of transaction risk which can be hedged using forward foreign exchange or foreign currency option contracts.
1256 and, thus, a foreign currency option could be a foreign currency contract.
Thus an unrealized loss existing on the date that a foreign currency option was transferred to a charity was disallowed.
dollar/U.K, pound exchange rate and decides to manage that risk by purchasing a foreign currency option directly from a U.S.
(For the underlying decision in the latter case, see 100 AFTR2d 2007-5591 and "Tax Matters: Economic Substance Prevails Against Another Son of BOSS," JofA, March 08, page 71.) Both cases involved foreign currency option spreads that the IRS deemed tax-avoidance shams.
* Notice 2003-81 offsetting foreign currency option contracts: A party claims a loss on the assignment of a Sec.

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