Section C
Date: 2015-10-07; view: 494.
Events
Receives specified currency.
Receives base currency.
Delivers base currency.
Delivers specified currency.
B4
· Below is a slide which John uses to describe the advantages that are offered by currency options. The list here, however, is out of order. Specify the two advantages to which John refers in this section in order. Listen again to this part of the presentation if necessary.
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B5
· Choose the best answer.
1. If you purchase something:
a) you hire it; b) you deliver it; c) you buy it; d) you state how much it costs.
2. An obligation is:
a) something you must do because there is a legal or moral requirement to do it; b) a particular thing that you want to do; c) a document promising to pay a sum of money; d) a sum of money owed by one person to another.
3. Value spot is:
a) a period of two weeks beginning two working days from now; b) the price for funds which will be exchanged two working days from now; c) the price for a currency in terms of the currency of another country; d) the date two days ahead on which funds are available in the bank.
4. Something that is straightforward:
a) happens immediately without delay; b) happens too quickly; c) is simple and uncomplicated; d) is very serious and important.
5. Anything that is unique about the option is:
a) to be found only in the option; b) to be found mainly in the option; c) difficult to understand; d) new and not very well known.
6. A deal is:
a) a business agreement; b) a business relationship; c) a way of saving money; d) a person who buys and sells things.
7. A principal advantage is:
a) an advantage that you believe in; b) a general advantage; c) an advantage in theory but not in practice; d) a main advantage.
8. Downside risk is;
a) the possibility of a fall in value; b) the possibility of a rise in value; c) the possibility of a fall in quality; d) the possibility of fewer advantages.
9. If something happens simultaneously, it:
a) happens without being planned; b) happens before something else; c) happens after something else; d) happens at the same time as something else.
10. A premium (here) is:
à) a large sum of money; b) a sum of money set aside for a particular purpose; c) a charge for the use of an option; d) a demand for payment.
B6
· Each of these phrases from the presentation fulfils a particular purpose. Match the items with the definitions.
| 1. First of all, what is a currency option anyway? What are we talking about? | A. Stating a feature of something which makes it better than anything else. | |
| 2. Can everyone see that? | B. Saying that you are going to talk about something later. | |
| 3. Like an ordinary foreign exchange deal. | C. Saying that something is simple. | |
| 4. So that's the essence of it. | D. Moving on to the next point. | |
| 5. It's a perfectly straightforward initial idea. | E. Making a comparison. | |
| 6. We now have to look at why the option has ... | F. Emphasizing that an option fulfils a function already referred to. | |
| 7. What is it that's unique about the option that gives it certain advantages that make it the best deal? | G. Introducing a definition or explanation. | |
| 8. ... and we'll come and discuss some of them in more detail. | H. Introducing the main feature of something which makes it better than anything else. | |
| 9. A principal advantage is that ... | I. Checking that everyone can see an illustration. | |
| 10. An option does that. | J. Saying that you have spoken about the main features of something. |
C1
· Look again at the slide shown in B4.
· Listen to the third part of John Morley's presentation
· Number the remaining advantages to show the order in which he mentions them in his presentation.
C2
· Listen to this part of the presentation again.
· Make brief notes. The headings you have numbered 3, 4 and 5 on the slide will help you.
· Compare your notes with those of a partner and discuss any differences.
C3
· Listen to this part of the presentation again
· Write down in the spaces provided the words that John actually uses instead of the words in italics.
1. An option is .................. useful for covering contingent cash flows ...... (especially)
2. ...... , for instance, where you might get the order ... (written offers to supply goods or carry out work at a stated price)
3. Range of...................... (exchange rates agreed for a currency option)
4. You can't ..... to deal at some other rate. (choose)
5. Most companies reckon they can live with a few cents ....... of an exchange rate. (movement)
6. So you can ...... , depending on ... (change the charges that you pay for the use of an option)
7. ... by which I mean that if you are ...... , for instance, and the dollar has been going up and up ...... (in a position where you have bought more dollars than you have sold)
8. You can take out an option to sell the dollars at......... . (today's price)
9. ... if it goes up, effectively you have locked in that amount of ........ . (financial gain or advantage)
10. And ............. might find this profit lock effect a useful one. (people responsible for a company's money)
11. ... an option and obtain ......... which you cannot get any other way. (an advantage)
C4
· Match the following options trading terms with their definitions.
| 1. Call | A. is the party that conveys the option rights to the option buyer. | |
| 2. Put | B. the last day on which an option can be either exercised or offset. | |
| 3. Strike price | C. an option that conveys to the option buyer the right to purchase a particular currency at a stated price at any time during the life of the option. | |
| 4. Option buyer | D. most currencies are reported daily in the business pages of most major newspapers, as well as by a number of Internet. | |
| 5. Option seller | E. this is the stated price at which the buyer of a call has the right to purchase a specific currency or at which the buyer of a put has the right to sell a specific currency. | |
| 6. Premium | F. an option that conveys to the option buyer the right to sell a particular currency at a stated price at any time during the life of the option. | |
| 7. Expiration | G. an option that has been previously purchased or previously written can generally be liquidated at any time prior to expiration by making an offsetting sale or purchase. | |
| 8. Quotations | H. a person who acquires the rights conveyed by the option: the right to purchase the underlying currency if the option is a call or the right to sell it if the option is a put. | |
| 9. Exercise | I. I the “price” an option buyer pays and an option writer receives. | |
| 10. Offset | J. an option can be exercised only by the buyer of the option at any time up to the expiration date. |
C5
· Choose those statements whose information deals with marketof currency options and proves that options are a great tool for traders.
1. There are currently various facilities available for engaging in foreign exchange transactions.
2. These financial tools offer a low cost method for speculation or hedging with minimal risk and high returns.
3. The Interbank market involves the buying and selling of foreign currencies amongst commercial banks.
4. Spot transactions account for more than 50% of all trades in the Interbank market.
5. Your full downside risk is always known in advance.
6. You can also fully customize your options including payout amounts, barrier prices and expiration dates. These customizable features put you in full control of your risk.
7. Once a party agrees to buy or sell a particular currency at a fixed rate of exchange, that party is obligated to do so.
8. They allow you to profit from a larger range of speculative movements than spot transactions. Depending on the option that you select, as long as the criteria behind your barrier prices are met, you will receive your payoff amount. If not, all that you can lose is your predetermined low option premium.
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