About Call Spread Option
It is a contract to sell or buy a currency against another foreign currency at the exchange rate and amount that has been determined at the time of the transaction, while the exchange of funds is carried out within the next 2 working days after the date of the transaction. The customer is required to exchange the funds at maturity.
Benefits of Call Spread Options
Customers can participate in the weakening of the USD- Customers can measure the loss limit against the weakening of the USD
- Calculation of swap points for high outright forwards (forward purchases) against spot: where the option premium price is compared to the forward.
- Customers can get the exchange rate difference from the upper strike and lower strike with the condition that the spot price is above the upper strike.
- Long term hedging
Call Spread Option Feature
- Call Spread Option transactions must have an underlying
- The value transaction cannot exceed the underlying nominal stated
- The period transaction cannot exceed the underlying period stated
- Customers must provide limit before do the transaction
Call Spread Option Risk
- Movements in exchange rates cannot be predicted accurately
- If the movements in exchange rates does not benefit the Customer, that is the markets rate exceeds the strike price
Cost of Call Spread Option
Call Spread Option premium fees are paid upfront (upfront premium) which is charged to the Customer, calculated based on the tenor, nominal amount and strike price adjusted to market conditions.
Call Spread Option Illustration
Transaction nominal : USD10,000,000
Transaction date : March 1, 2023
Currency Transaction period : 3 years
Currency pair : USD/IDR
Option premium payment date : March 3, 2023
Determination date (expired date) : March 1, 2026
Due date : March 3, 2026
Upper Strike : USD 16,000
Lower Strike : USD 13,000
Payout Call Spread Option on maturity date:
- If the exchange rate (spot) is below USD 13,000 the Customer can buy USD 10 Million at the spot level
- If the exchange rate (spot) is above USD 13,000 but below USD 16,000, for example the exchange rate information (spot) on the option maturity date is USD/IDR = 14,000, for the repayment Customer currency credit is at price of USD 13,000, 1000 cheaper than the market price.
- If the exchange rate (spot) is above USD 16,000 the Customer gets a positive difference between the upper strike and lower strike of IDR 30 Billion (USD 3,000 x USD 10 Million).
Advantages of Call Spread Options:
- Unlimited participation when USD weakens below the lower strike (USD 13,000).
- Protected to buy USD lower strike (USD 13,000) to upper strike (USD 16,000).
- Get the difference between the upper strike and lower strike exchange rates, if the spot is above the upper strike.
Term and Conditions:
- The Customer has a current or savings account (Rupiah or Foreign Currency) at Maybank and has signed the required documents required for CSO transaction.
- Customers are required to provide cash collateral in the amount of at least 10% (ten percent) of the national value of the transaction at the time of the transaction.
- Customers are required to submit underlying transactions.
- The Customer authorizes the Bank to debit the account used in the CSO transaction.
Disclaimer
- The Bank has right to refuse product and service applications if the Customer does not meet the requirements and applicable laws and regulations.
- The Customers must carefully read this Information Summary of Product and Service and can contact the Bank if there any questions regarding all matters related to this Information Summary of Product and Service.
For further product information, please contact your Relationship Manager or come to the nearest Maybank Indonesia Branch.
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