Is Currency Hedging right for my business?
Forwards and Options FX hedging products are derivative products which involve risks due to the volatility of the FX markets. For example, if you book a Forward Exchange Contract and the spot market ends up moving in your favour, you cannot participate in the more favourable spot market. You are locked in for your fixed amount, at the fixed rate, for the fixed date.
To take advantage of favourable market movements, while also securing a level of protection, our option products could be a more suitable solution for you and your business. To walk you through this process our risk management experts are trained and qualified to offer tailored strategies and products that are unique to your short and long-term business goals. The drawback of an Option is that typically you must agree to a protection rate that is less favourable than the current market forward rate, in exchange for the potential participation you might achieve.
How our currency options work
An introduction to Currency Options
Currency Options can seem complicated, and are often thought of as products used by bankers or investors to speculate on the money markets. However, this is not entirely true. Read more.
Tailoring Options to suit your needs
Options are flexible products and there are numerous ways of tailoring them to your needs. Read more.
Closing out an Option
Determine the value of the option when it is no longer suitable for your business. Read more.
Am I getting a good deal?
How to asses an Option Contract and see if you are getting value for money. Read more.
How to flex your Options
See how you can flex your options to achieve benefits such as increasing the possibility of greater participation. Read more.
Taking early delivery of an Option
If you take out an Option for a date in the future but find that you need the funds beforehand, it is possible to take early delivery of your funds. Read more.
What is a Margin Call?
Understand what costs are involved when reviewing your Option Contract and find out how the spot rate can affect your contract. Read more.
Options videos
Knock-in Option
With a Knock-in Option, your protection rate will be placed at a level that is marginally less favourable than the current market Forward rate. You also have full participation in favourable movements.
Knock-in Convertible option
With a Knock-in Convertible option, you have a protection rate that is marginally less favourable than the current market Forward contract. You also have full participation in favourable market.
Knock-In Participating option
A Knock-In Participating option gives you full protection on your exposure while allowing for a certain degree of participation in favourable market movements up to a pre-set Knock-In rate.
Knock-In Reset option
With a Knock-In Reset option, your protection rate will be placed at a level that is marginally less favourable than the current market forward rate. You also have full participation in favourable.
Feature and benefits
Forwards Contracts
Lock in an FX rate for a future date up to a year in advance, so you can secure margins even if the market moves. This way, you know in advance exactly what exchange rate will be applied to your transaction.
It is important to keep in mind that when you book a Forward Contract you are obligated to exchange funds at maturity, regardless of what the available spot rate is at that time.
Future Payments
If the market has moved in your favour, but you’re not due to pay for weeks or even months, Future Payments let you lock-in the current exchange rate up to 90 days in advance. Your bottom line is protected, your foreign funds are ready when you need them, and there’s zero upfront cost.
Market Orders
Secure a desired exchange rate by taking advantage of our 24-hour market monitoring facility. We watch the markets on your behalf, even while you’re sleeping, and either notify you if your target rate is reached, or process your order for you automatically if preferred.
Option Contracts
Option Contracts provide protection from adverse market developments while also giving you the opportunity to participate in favourable moves. In general, an Option will offer a lesser degree of protection in exchange for a greater degree of upside participation. This flexibility allows you to tailor your strategy to your specific requirements, hedging objectives and risk appetite.
Disadvantages and Risks of Hedging Strategies
Hedging products are derivative financial instruments which involve risks due to FX market volatility. This can be disadvantageous and pose risks. If uncertainties concerning your risk management remain, we advise to not enter into contracts with Financial Instruments.
Western Union Business Solutions (WUBS) is the issuer of the products discussed in this video and would be a counterparty to any transaction you undertake with us. Any advice or recommendation provided by WUBS is provided in a manner solely incidental to the role of WUBS as the issuer of the relevant product and counterparty to the relevant transaction, and therefore WUBS has a financial incentive to enter into a transaction with you. You should use your independent judgment and consult with your own independent advisors in evaluating whether to enter into a transaction with WUBS. Customers may be required to meet certain eligibility requirements in order to enter into foreign exchange transactions with WUBS.
This video is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject WUBS or its affiliates to any registration or licensing requirement within such jurisdiction.