What is an FX option? The right, not the duty, to swap currency at a set rate
By SendPay Business · · 2 min read
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An FX option, or currency option, gives the buyer the right, but not the obligation, to exchange one currency for another at a fixed rate on or before a set date. The buyer pays a fee up front, called the premium, for that choice.
How it works
- You agree a rate, an amount and an end date with the provider.
- You pay the premium up front.
- If the market rate ends up worse than your agreed rate, you use the option.
- If the market rate is better, you let the option expire and exchange at the market rate instead.
Calls and puts
A call option gives the right to buy a currency at the agreed rate. A put option gives the right to sell it. A business expecting to pay in euros might buy a euro call to cap what those euros will cost.
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Options versus forwards
A forward contract locks in a rate and must be used, whether the market moves for or against you. An option protects against bad moves while letting you benefit from good ones, but that flexibility costs the premium, which is not returned if the option goes unused.
Where SendPay fits
SendPay does not offer FX options, forwards or other hedging products. SendPay platforms include GBP, EUR and USD accounts and currency exchange for payments, where the platform owner sets their own exchange fee.
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SendPay Business is a technology company, not a bank. Accounts, cards and payments are powered by licensed partners.
Questions people ask
What would an option save me?
Our free FX option calculator shows the worst case, the break-even rate and the outcome at any market rate.
FX option calculator →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.