A currency option (FX option or foreign exchange option) in which the premium payment is conditional on the actual movement of the spot exchange rate. For instance, a conditional currency option may take the form of a call option with a strike price of USD/Euro 1.2 and a conditional premium of 8 cents with a trigger spot of USD/Euro 1.3. If the future spot rate doesn’t trade through the trigger, the option’s holder will not be required to pay the premium. Otherwise, when the future spot rate breaks through the trigger, the premium payment gets activated.
December 16, 2024
