Introduction

An RMB/FX option portfolio refers to a portfolio of simple options with the aim of reducing exchange rate risk and realizing hedging. RMB/FX option portfolios include the following types:

1. Risk Reversal: It refers to a portfolio whereby a client, based on its needs, buys a call option with a relatively high strike price, and sells a put option with a relatively low strike price at the same time, or buys a put option with a relatively low strike price, and sells a call option with a relatively high strike price at the same time.

2. Call/Put Spread: It refers to a portfolio whereby a client, based on its needs, buys a call option with a relatively low strike price, and sells a call option with a relatively high strike price at the same time, or buys a put option with a relatively high strike price, and sells a put option with a relatively low strike price at the same time.

3. Seagull Option: It refers to a portfolio whereby a client, based on its needs, conducts a call spread portfolio and then sells a put option with a low strike price, or conducts a put spread portfolio and then sells a call option with a high strike price.

4. Calendar Option: It refers to a portfolio whereby a client, based on its needs, buys a call option with a relatively near due date, and sells a put option with a relatively far due date at the same time, or buys a put option with a relatively near due date, and sells a call option with a relatively far due date at the same time.

Instruction

To apply for the RMB/FX option portfolio business, clients shall enter into the Master Agreement for RMB-Foreign Exchange Swaps and RMB-Foreign Exchange Option Transactions, and abide by relevant regulations of China on foreign trade, customs and insurance (among others), as well as related provisions of the People’s Bank of China, CBIRC, and SAFE.

Application Procedure

The same as RMB/FX spot and forward.