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Finance GlossaryForex Options
Forex Options
Definition of Forex Options
Forex options are exchange-traded derivative contracts that give the right but not the obligation to buy or sell a pair of underlying currencies at a pre-agreed price and date. Forex options are also known as currency options.
Every forex option can be split into a call or put option. A forex call option gives the holder the right to buy underlying forex pairs while a forex put option gives the holder the right to sell underlying currency pairs.
In either case, there is no obligation to exercise the contract but there is a pre-agreed price and expiration date attached. In India, forex options are only available for the USD-INR currency pair.
Every forex option can be split into a call or put option. A forex call option gives the holder the right to buy underlying forex pairs while a forex put option gives the holder the right to sell underlying currency pairs.
In either case, there is no obligation to exercise the contract but there is a pre-agreed price and expiration date attached. In India, forex options are only available for the USD-INR currency pair.
Related Terms
Capital Gain Or Loss
A capital gain is a profit that an investor or trader earns by selling an asset while a capital loss is the money a trader or investor loses after selling an asset. Capital gains are taxed while capital losses can be used to offset gains.
Macro Analysis
Macro analysis is the study of broad economic factors that influence financial markets as a whole. It includes interest rates, inflation, economic growth, government policies, and global events that shape overall market direction.
Go Public
To “go public” or going public means to get listed on the stock market by launching an Initial Public Offering (IPO). The act of going public involves receiving approval from existing stakeholders to launch an IPO, the price of which is decided by two methods:
- Book Building
- Fixed price
Once the price of the IPO is decided, the shares are offered to the public on the primary market. Not everyone who applies to an IPO may get shares - the system works on the basis of allotment. After the shares are issued, the company is said to move from the “go public” stage to the publicly traded company stage.
Donchian Channels
A Donchian Channel is the area between upper (highest price) and lower (lowest price) bands formed around the median as a result of calculating the moving average of a security’s price over a period of time. Visually, the Donchian Channel will have three lines.
Deferred Tax Liability
A deferred tax liability is line item on a company’s balance sheet that refers to taxes that owed but due in the future. Common examples of deferred tax liabilities include:
- Paying less tax
- Sales in instalments
Enterprise Value
Enterprive Value is a metric used to determine the total value of a company. It is valuation technique used by companies to understand how much money they need to pay to acquire another company.
Conversely, Enterprise Value is also used to figure out the amount of money a company can get on selling their business. To calculate the EV of a company, the total market capitalization is combined with the net debt or cash subtracted from debt. The formula to calculate Enterprise Value is:
EV = Market Capitalization + Net Debt
Or
EV = Market Capitalization + Debt - Cash
Conversely, Enterprise Value is also used to figure out the amount of money a company can get on selling their business. To calculate the EV of a company, the total market capitalization is combined with the net debt or cash subtracted from debt. The formula to calculate Enterprise Value is:
EV = Market Capitalization + Net Debt
Or
EV = Market Capitalization + Debt - Cash
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