The Chinese bank said through option trading, a company will acquire the right upon payment of a certain fee to the bank to buy from or sell to the bank a specific amount of a currency at a pre-agreed exchange rate on a specified date.
According to the ICBC, upon maturity of the option, if the strike price of the option is higher than the spot exchange rate on the maturity date, the company will exercise the option to buy or sell the foreign currency at the strike price.
If the strike price of the option is below the spot exchange rate at expiry, the company will simply let the option lapse and execute the buy/sell contract in the spot market.
The bank said that it’s Beijing branch secured two deals of the RMB against foreign currency options with two foreign trade companies, with the notional principal amount at $1.3m, in early April 2011.
Presently, the ICBC Beijing branch is offering USD and Euro options, covering 13 standard option periods. Two-way quotes are offered for customers to buy call/put options.
The bank added that in terms of offering to group corporations, import/export companies, ‘Go global’ companies, the Beijing branch offers tailored solutions for them to hedge against exchange rate risks, and hedging products such as forward exchange settlements, RMB-foreign exchange options.
In terms of offering to retail investors, the precious metal trading service for personal accounts already includes trading of gold, silver, platinum, in RMB or USD.
