Manage Your FX Risk on Your Own Terms
Looking for a solution that offers more than a fixed exchange rate? Options and option structures provide flexible hedging tools for companies seeking both protection and opportunity. Unlike forwards, they allow you to:
Secure a minimum acceptable exchange rate and protect your pricing and margins.
Benefit from favourable market movements if the exchange rate develops in your favour.
Combine multiple scenarios and design tailored solutions – from straightforward vanilla options to advanced structured strategies.
Optimise the exchange rate in exchange for a clearly defined and acceptable level of risk.
This flexibility enables options to go beyond traditional forward contracts – helping you safeguard margins while preserving upside potential.
OPTIONS and FX Hedging – Protection Against Currency Risk
Flexible Solutions for up to Three Years
Options can be arranged with maturities of up to two years (and, in selected cases, up to three years). They are suitable both for short-term hedging of specific contracts and for longer-term cash flow planning.
Tailored Strategies
Currency options and structured solutions allow you to hedge a wide range of risks arising in your business – from exchange rate fluctuations to cash flow volatility.
Broad Range of Currency Pairs
Our offering extends beyond EURCZK and USDCZK. We also provide solutions in PLN, GBP, CHF, JPY and other currencies. If you operate across multiple currencies, options can support your hedging strategy accordingly.
Time Flexibility
If an option is not exercised at maturity, the resulting exposure can be efficiently transformed into an FX swap and deferred to a later date.
Are you looking for advice or answers to your questions? Let us know, we’re happy to help.
We are available on weekdays from 8:00 to 17:30 Monday to Thursday, on Fridays from 8:00 to 17:00.
How It Works in Practice?
Before you begin using currency options, we guide you through the entire process and provide a detailed explanation. The master agreement can be concluded online via our onboarding platform.
If you are uncertain which option structure best suits your needs, our dealers will review your situation with you and help design an appropriate solution.
The hedge itself is executed by phone through our dealing desk. A trade confirmation is subsequently delivered by email.
At settlement, you may choose to: – settle the option via currency transfer between accounts, – roll the position forward (in full or in part), or – settle the exchange rate difference in cash.
Types of Option Structures: Bonus Forward Limit Forward Participating Forward Enhanced Forward Participating Limit Forward Limit Collar and other tailored structures.
Options – Multiple Instruments, Unlimited Possibilities
Vanilla Options
Selling a vanilla option means that the client undertakes an obligation to perform the transaction if the counterparty (the option buyer) exercises its right. The client receives the option premium as immediate income but assumes the risk of adverse exchange rate movements. Purchasing a vanilla option is a currency derivative granting the client the right, but not the obligation, to exchange a predetermined amount of currency at a predefined exchange rate (strike) on a specified date.
Participating Forward Contract
A Participating Forward consists of purchasing a vanilla PUT option (when selling the base currency) and simultaneously selling a Knock-In CALL option with the same strike. When purchasing the base currency, the structure is reversed (purchase of a vanilla CALL and sale of a Knock-In PUT). The product offers limited participation in favourable market movements, provided the barrier is not triggered.
Limit Forward
A Limit Forward combines the purchase of a Knock-Out PUT (when selling the base currency) and the sale of a vanilla CALL (European style) or a Knock-Out CALL (American or window style variant). When purchasing the base currency, the structure is reversed (purchase of a Knock-Out CALL and sale of a PUT or Knock-Out PUT). The product typically offers a more favourable exchange rate than a standard forward, but with the risk that hedging protection ceases if the barrier is reached.
TARF (Target Accrual Redemption Forward)
TARF is a structured currency product designed for FX risk hedging. It consists of a series of forward transactions representing a binding obligation for the client to buy or sell predetermined amounts of one currency against another at specified future dates at an agreed strike rate.
EKI TARF
An EKI TARF incorporates a Knock-In barrier that allows the client to benefit from a more favourable spot rate until the barrier is triggered. It typically offers a more attractive rate than a standard forward, in exchange for uncertainty regarding the total transaction volume and overall duration.
EKI COLLAR TARF
An EKI COLLAR TARF likewise incorporates a Knock-In barrier, enabling participation in favourable spot movements until the barrier is reached. It generally provides a more advantageous rate than a conventional forward, at the cost of uncertainty in total traded volume and the tenor of the structure.
Risks Arising from Entering into Forward Contracts for Foreign Exchange Risk Hedging
Frequently Asked Questions – Currency Options
A financial instrument granting a company the right, but not the obligation, to exchange currency at a pre-agreed rate and date. It protects margins while preserving upside potential.
A forward is binding. An option provides flexibility – the right to transact without obligation. Exporters and importers may benefit from favourable movements while limiting downside risk.
They enable active FX risk management, protection against adverse volatility and participation in positive market developments – unlike a pure forward hedge.
Call options (right to buy currency) and put options (right to sell currency). Structured combinations can be tailored to corporate needs.
The price is the option premium, determined by maturity, strike level and market volatility. The premium is paid upfront in exchange for protection and flexibility.
Options can range from weeks to over one year. Most corporates choose maturities aligned with underlying commercial contracts, typically up to 12 months.
Exporters and importers seeking to stabilise cash flow, companies with recurring FX exposure and firms hedging one-off transactions.
They establish a minimum exchange rate while retaining access to more favourable market rates, enabling reliable pricing and margin planning.
European options are exercisable only at maturity; American options may be exercised at any time prior to expiry. The choice depends on risk management strategy.
In corporate treasury practice, options are primarily used for risk mitigation rather than short-term speculation. The objective is stability, not trading profit.
Yes. Options may be combined with forwards or other derivatives to reduce premium costs and optimise hedge structures.
The company defines volume, currency and tenor. Terms are agreed with the dealer, documentation is executed and the option becomes effective upon premium payment.
The maximum risk for the buyer is the loss of the premium if the option is not exercised. This risk is limited and known in advance.
The premium is a one-off upfront cost. In return, the company gains certainty for future transactions and improved cash flow predictability.
They balance certainty and flexibility, enabling companies to operate internationally without exposing margins to adverse currency volatility while retaining upside participation.
