FX OPTIONS ENTRY
FX options are an alternative to forward contacts when hedging an FX exposure because options allow the company to benefit from favorable FX rate movements. Due to the increasing trading volume of FX options, Kooltra has developed powerful tools to help you monitor options and their associated risk.
You can create an option in Kooltra by clicking on Trading > FX Options in the navigation pane.
Booking an Option
In order to book an option you will need to input the details of the option. The details that you can fill out are:
- Counterparty (required) - Specify a Counterparty/Account name.
- Contact (optional) - Specify a contact that requested or is associated with the option. The contacts that will be available are contacts associated with the specified counterparty.
- Book (optional) - You can specify the book you would like this transaction to be under, if your business segregates transactions into different trading books.
- House Action (required) - Specify an action (Buy/Sell). It is set up from YOUR perspective. For example if the Action is set to Buy then your business (the house) would be buying the left-hand currency specified in Pair fields.
- Option Type (required) - Specify the option type by using the dropdown. The types available are Vanilla, Single Barrier and Double Barrier.
- Exercise Style (required) - Specify if the option is European or American.
- Payoff Type (required) - Specify if the option is call or put.
- Pair (required) - Specify the currency pair. The currencies that are available are the currencies that have been selected in the entity settings page. If you do not see the desired currencies listed, you will need to add the currency in entity settings. After you specifying the currencies, a default rate will typically be automatically populated. If you would like to use your own rate, you can enter it manually in the Strike field.
- Notional (required) - Enter the amount of the option in the left-hand currency of the pair. You are buying (selling) this amount of currency 1 if you are long a call (put).
- Strike (required) - Specify the rate at which you are able to buy (sell) the currency, if you are long a call (put).
- Barrier Type (required for Barriers only) - Specify if the option is a down-in, down-out, up-in or up-out.
- Barrier Level (required for Barriers only) - Specify the pre-determined barrier price level.
- Trade Date (required) - When you are entering an option, the trade date will automatically populate as today's trade date.
- Expiration Date (required) - Specify the expiration date of the option. It must be equal to or greater than the trade date.
- Premium (required) - Enter the price paid to acquire the option.
- Premium Date (required) - When you are entering an option, the premium date will automatically populate.
- Comment & Client Comment (optional) - You can add internal comments (ex. comments for compliance officers) and a client comment. This information is stored on the trade and is available for subsequent reporting.
Once you have entered all of the details of the option, click Deal. This will add a Status field which by default is Open, and will assign an Option ID at the top of the window. You can also click on the Deal and New button which will deal the option, and open a new window allowing you to book options in rapid succession.
Note that if you have made mistakes on your ticket, you can quickly clear the information by clicking on the Reset button.
Updating/Cancelling an Option
Kooltra allows users to modify or cancel Open options. In order to do this, you will need to access the details of the option. This can be done in many different ways such as clicking the transaction ID on the Option Monitor page, or searching for the Option ID in the global search bar.
Once you have opened the option details, you can amend any trade detail that is not shaded out. This includes amending the most fields except for the Option Status. Once you have amended the desired field(s), click on the Update button to complete the update.
Alternatively, you may also cancel the option by clicking on the Cancel button. Once the option has been cancelled, it cannot be reopened.
The Details Tab can be accessed at the top of the FX Option entry page. This tab is typically used to view details of options that have entered Kooltra through the API. The available details are Option ID, External ID, Source App and Platform Venue.
In addition to Comments and Client Comments, users can input additional notes about the trade in the Notes tab.
The History Tab (you may need to click the right arrow to see this tab) tracks changes made to the option. This includes tracking what user made the change and at what time.
booking an option