Delta exposure means that the options held are not hedged. ) lost Delta. For example, the Delta of an option portfolio is 500, and the Delta exposure of this portfolio is 500, without any Delta hedging.
There are many reasons for the change of Delta exposure, which may be that the portfolio itself has changed, such as buying or selling options. Besides, it is caused by gamma rays. Gamma is the second derivative of the option price relative to the target price (that is, the target price changes 1 unit, and how much Delta changes). If the Gamma of the portfolio is not zero, the Delta exposure of the portfolio will also change when the price of the subject matter changes.
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Foreign exchange option, also known as currency option, refers to the option that the buyer of a contract buys or sells a certain amount of foreign exchange assets at the specified exchange rate on a future agreed date or within a certain period after paying a certain option fee to the seller.
Foreign exchange option is a kind of option. Compared with stock options, index options and other options, foreign exchange options buy and sell foreign exchange, that is, the option buyer obtains a right after paying the corresponding option fee to the option seller, that is, the option buyer has the right to buy and sell the currency agreed by the seller at the exchange rate and amount agreed by both parties in advance on the agreed expiration date, and the buyer with the right also has the right not to execute the above-mentioned sales contract.
Foreign exchange option trading is a trading method, which is the development and supplement of several original foreign exchange hedging methods. It not only provides customers with ways to preserve foreign exchange, but also provides them with opportunities to profit from exchange rate changes, so it has great flexibility.
Buying and selling foreign exchange options is actually a right buying and selling. After paying a certain amount of option fee, the right buyer has the right to buy or sell the foreign currency of the agreed amount from the right seller at the agreed exchange rate in a certain period of time in the future, and the right buyer also has the right not to execute the above sales contract.
The advantage of foreign exchange options business is that it can lock in the future exchange rate and provide foreign exchange preservation. Customers have good flexibility and selectivity, and they can also get profit opportunities when the exchange rate changes in a favorable direction. For those import and export businesses whose contracts have not been finalized, it has a good value-preserving effect.
The seller's profit is limited, limited to the option fee, and the risk is unlimited. Option foreign exchange trading is actually a kind of power and money trading. Power buyers have the right to buy or sell an agreed amount of foreign currency to power sellers (such as banks) at an agreed exchange rate in a certain period of time in the future. At the same time, the power buyer also has the right not to execute the above sales contract.
On the basis of forward foreign exchange and currency futures, options not only have the same function of avoiding exchange rate risk and fixed cost, but also overcome the limitations of forward and futures trading, so they are favored by international financial markets.
Option trading is especially beneficial for those continuous transactions, such as bidding for foreign projects or dividends of overseas companies and other uncertain income or investment hedging.