Foreign Exchange Options: An International Guide to Currency Options Trading and Practice is an excellent update to an earlier book on the same subject by author Alan Hicks. It does an excellent job of taking all of the best information from the first book and expanding into outstanding updates and new information in this newest resource. Hicks is a well known and internationally respected expert on the foreign currency exchange markets and once again delivers a terrific book packed with the kind of information and insights that all traders, novice to expert, can benefit from.
Overview and general information themes
The book contains some valuable and useful information themes, each of them presented in a way that is clear, easy to understand, and extremely relevant to real world practical applications. Many books on this subject claim to offer these kinds of benefits, but few do it as well as Foreign Exchange Options: An International Guide to Currency Options Trading and Practice. Some of the most important and helpful topics contained in the book include:
- The advantages and benefits of hedging foreign currency exchange risk using currency options.
- A detailed outline and discussion of the structure and functional aspects of the main foreign currency trading exchange as well as the over the counter exchange.
- Specific and detailed information about common market practices, different aspects of trading risk, and the pricing of currency options.
- A clear and easy to understand description of how many of the major international banks approach hedging and trading, including specific information about their real world practices and practical applications.
- More information than previously known or available about the advantages, disadvantages, risks, and potential gains involved in the trading of exotic foreign currency options.
Why the need for an updated edition?
The need for this updated edition arises from the tremendous and explosive changes in the foreign currency exchange market in just a few years. At the time of the updated version the total value traded daily on the foreign currency exchange market was in excess of $100 billion – a mere drop in the bucket compared to today’s daily volumes in excess of $1 trillion!
There were also a number of changes that occurred in regulatory requirements and oversight as well as the most common and popular market practices used by foreign currency exchange traders. This updated information is presented quite clearly in a style that makes it easily understandable for traders of all skill levels. Additionally, the updated edition contains a wide variety of new charts, graphs, diagrams, and real world examples of practical applications.
As before and even more so now, Foreign Exchange Options: An International Guide to Currency Options Trading and Practice is an excellent resource for novice foreign currency traders, experienced foreign currency traders, accountants, auditors, and other financial professionals.
Table of contents details and specifics
The table of contents from Foreign Exchange Options: An International Guide to Currency Options Trading and Practice reveals the breadth of subjects and important information contained in the book. Let’s take a closer look:
- Basic topics – Definitions of currency options, premiums, put and call, option styles, intrinsic value, strike price, and exercise of options
- Marketplace discussion – Description of functions, structures, and processes of the exchange listed currency market, the over the counter currency market, and a side by side comparison of the features, advantages, and disadvantages of each
- Key characteristics – Information about key currency option characteristics, including FX position, long or bought call, long or bought put, short options, straddle, and underlying position
- Parity of put and call – Discussion of various synthetic options as well as a practical example of real world put and call parity
- Combinations of options – A look at combinations of options and useful strategies for both the exchange traded market and the over the counter market
- Pricing of options – A detailed and specific look at a variety of factors affecting option pricing, such as intrinsic value, volatility, time value, and pricing systems and terms
- Risks of trading currency options – A comprehensive look at the concept of option trading risk, including delta, gamma, vega, theta, phi, rho, beta, lambda, and omega
- Trading and hedging options portfolios – Description of various trading and hedging concepts, including option replication, delta neutral concept, gamma versus theta trading, gamma neutrality, aspects of rho, volatility trading, naked hedging, and proximity of expiry effects
- Market practices of OTC – Discussion of standard market practices of the over the counter market, including exercise procedures, volatility quoting, and other noteworthy practices
There is still much more to show and highlight from the table of contents, which will appear in the next section.
More table of contents details and specifics
Here are even more details and specifics from the table of contents of Foreign Exchange Options: An International Guide to Currency Options Trading and Practice:
- Control and management of active portfolios – An array of information about delta, gamma, vega, theta, controlling gamma, vega, and theta together, maturity concentration control, total book size, rho control, intra-day control, omega control, and premium payment control
- Regulatory oversight and controls – Includes information about the London Code of Conduct, foreign exchange associations, Capital Adequacy Directive, Bank of England Reporting Guidelines of April, 1984, and an overview of other countries
- Terms and conditions – Foreign currency options involve some very specific terms and conditions, laid out in various documents such as the London Interbank Currency Market Terms, the International Swap Dealers’ Association, the Barrier Option Appendum, and more
- Counterparty credit risk – This subject includes information about netting, margins, foreign exchange limits, option counterparty risk factor, and master agreement terms and conditions
- Exotic options – There are more and more exotic options coming into the foreign currency exchange markets than ever before, and this discussion covers examples such as chooser options, Bermudan options, power options, forward start options, contingent options, shout options, ladder options, and many more
As you can see, Foreign Exchange Options: An International Guide to Currency Options Trading and Practice is a very thorough and comprehensive resource for anyone looking for information on all aspects of the foreign currency exchange market.
Additional materials in the book
Another very helpful aspect of Foreign Exchange Options: An International Guide to Currency Options Trading and Practice is the wealth of additional materials in the book, in the form of detailed appendices. These appendices cover important areas such as Bank of England guidelines, Exchange market specifications, international over the counter market terms and conditions, and accounting practices.
The glossary is comprehensive as well, filled with key terms ranging from the most basic to the most complex and arcane. This is especially helpful for the novice trader, but is certainly good for review or refresher purposes for more experienced traders in the foreign currency exchange market.
These additional materials, combined with the comprehensive and outstanding content contained in the main content of the book, make Foreign Exchange Options: An International Guide to Currency Options Trading and Practice an exceptional resource. It is truly one of the “must have” books everyone interested in or trading in the foreign currency exchange market should have included in their library of currency exchange resources.
About the author
The author of Foreign Exchange Options: An International Guide to Currency Options Trading and Practice, Alan Hicks, has an exceptional amount of experience and background in the foreign currency exchange market. His career spans over two decades of internationally recognized success, beginning at the Royal Bank of Canada and continuing with other major players in the foreign currency market including Fidelity Bank, Standard Chartered Bank, and Chase Manhattan just to name a few. Few other professional practitioners have as much experience and practical knowledge, making Hicks one of the best people anywhere to provide the comprehensive collection of information found in this book.