Take out the FX contract that suits the situation. The level of protection and flexibility differs from one type of FX derivative to another. Our product profiles give you examples and scenarios to make the selection easy for you. HSBC is recognised as a market leader in FX derivatives globally. For South-South trading and other emerging markets-led import and export business, our financing-focused leadership in the emerging markets makes us a preferred solutions provider.

Our worldwide trading and structuring team leverages our strengths as one of the strongest universal banks to act as a major market maker and liquidity provider. Tackling currency movements against imports requires tools specially made for import businesses. Our solutions were developed with the industry in mind, to help you stay profitable through uncertain times. Transfer all content from: An average rate option ARO is a useful tool for companies that need to make or receive regular payments in foreign currency.

It provides protection against adverse movements in foreign exchange rates while also allowing the company to benefit from any movements in their favour. A premium is payable for an ARO. To take out an ARO contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to buy USD. How an ARO works For example, you import materials from the US, and have to pay a supplier USD, per month for the next year.

You are looking to hedge the next year in full and seek protection at your budgeted rate of 1. You buy an ARO that protects against the average exchange rate for the year falling below 1.

At the end of every month, as the payment is due, you buy USD, in the spot market as required. At maturity, the strike 1. If the average of the 12 monthly fixings is lower than the strike protection rate, HSBC will, at maturity, compensate you with a cash payment equal to the difference between the strike rate and the average rate over the period on your protected amount.

If, on the other hand, the average of the 12 monthly fixings is higher than the strike rate, then by dealing in the spot market, you will have been able to benefit from favourable currency rates over the year, and you will allow the option to lapse.

Click here to see an enlarged version of this image. Please read the disclaimer carefully. A currency option provides you with the right to certain protection at a specified foreign exchange rate on a specific forward date.

You are, however, under no obligation to deal at your protected rate, and you may walk away from the deal at maturity and transact in the spot market if the rate has moved in your favour. A currency option, therefore, combines the certain protection provided by a forward foreign exchange contract with the flexibility of a spot deal. A premium is payable for a plain vanilla currency option. Currency options are available in nearly any currency pair where there is a forward market.

To take out currency option, you need to advise us of the amount, the currencies involved, the expiry date and the exchange rate that you are looking to protect. How a currency option works For example, you import materials from the US, and need to buy USD, in six months' time to pay a supplier.

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HSBC sells to you a currency option providing protection at 1. However, at maturity, if the rate in the market is more favourable than 1. You exercise the right to buy USD, at 1. You let your currency option expire and simply buy USD, at the market rate of 1. This structure entitles you to buy foreign currency at a specified protected 'worst-case' rate of exchange or at a more favourable rate, as far as a predetermined 'best possible' limit rate.

If the limit rate is hit or exceeded at any time during the life of the trade, you are obliged to deal at the protected worst-case rate. There is no premium payable for a forward extra FE. To take out an FE contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to buy foreign currency.

We will then tell you the limit rate. How an FE works For example, you import materials from the US, and have to pay a supplier USD, in six months' time. The forward rate for six months is 1. You would like to benefit from favourable exchange rate moves but are reluctant to pay a premium for this. You inform us that you are prepared to accept a worst-case rate of 1. We then calculate the limit rate which is dependent on market variables at the time to be 1. You are entitled to buy dollars at 1.

You are obliged to buy dollars at 1. You can buy dollars in the spot market at 1. This structure entitles you to buy foreign currency at a specified protected 'worst-case' rate of exchange or at a more favourable rate, up to a predetermined 'best possible' limit rate.

If the limit rate is hit or exceeded at any time during the life of the trade, you are obliged to deal at the original forward rate.

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There is no premium payable for a forward extra plus. To take out a forward extra plus contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to buy your foreign currency.

How a forward extra plus works For example, you import materials from the US, and have to pay a supplier USD, in six months' time. This structure provides a guaranteed protected rate for your full exposure while allowing you to benefit from a favourable exchange rate move on a predetermined portion of your currency exposure.

There is no premium payable for a participating forward. To take out a participating forward contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to buy your foreign currency.

We will then tell you the level of participation you can benefit from. How a participating forward works For example, you import materials from the US, and have to pay a supplier USD, in six months' time. You inform us that you are prepared to accept a worst rate of 1. We then calculate the participation level to be 50 per cent. You are entitled to buy your full USD, at 1.

You are obliged to buy USD, at 1. However, the remaining USD, can be purchased in the spot market at 1.

This will give an average rate of 1. This structure provides a hedge rate at zero premium cost with the ability to benefit from a potentially unlimited favourable exchange rate move. There is no premium payable for a tracker forward. To take out a tracker forward, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to buy your foreign currency.

How a tracker forward works For example, you import materials from the US, and have to pay a supplier USD, in six months' time. The tracker forward provides protection for you to buy USD at a worst-case rate of 1. However, by the maturity date, you are obligated to buy USD from HSBC at the prevailing market rate less 4 cents, although the net rate cannot be worse than 1.

You are obliged to deal at the protected rate of 1. You are obliged to deal at 1. Stay focused on business by having the best FX derivatives behind your profits.

Exporting is complex even without foreign currency fluctuations; our product profiles show how our tools work to protect you against volatility. To take out an ARO contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to sell USD.

How an ARO works For example, you export materials to the US, and receive USD, per month for the next year from your customer. You receive the USD, at the end of every month and sell them in the spot market as required. If the average of the 12 monthly fixings is higher than the strike protection , HSBC will, at maturity, compensate you with a cash payment equal to the difference between the strike rate and the average rate over the period on your protected amount.

If, on the other hand, the average of the 12 monthly fixings is lower than the strike rate, then by dealing in the spot market, you will have been able to benefit from favourable currency rates over the year and you will allow the option to lapse.

To take out a currency option, you need to advise us of the amount, the currencies involved, the expiry date and the exchange rate that you are looking to protect. How a currency option works For example, you export materials from the US, and need to sell USD, in six months' time to pay a supplier. You exercise the right to sell USD, at 1.

You let your currency option expire and simply sell USD, at the market rate of 1.

This structure entitles you to sell foreign currency at a specified protected 'worst-case' rate of exchange or at a more favourable rate, as far as a predetermined 'best possible' limit rate. To take out an FE contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to sell your foreign currency. How an FE works For example, you export materials to the US, and are due to receive USD, in six months' time.

You are entitled to sell dollars at 1. You are obliged to sell dollars at 1. You can sell dollars in the spot market at 1. If the limit rate is hit or exceeded at anytime during the life of the trade, you are obliged to deal at the original forward rate. To take out a forward extra plus contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to sell foreign currency. How a forward extra plus works For example, you export materials to the US, and are due to receive USD, in six months' time.

You can sell dollars in the market at 1. This structure provides a guaranteed hedge for the full exposure while allowing you to benefit from a favourable exchange rate move on a predetermined portion of your currency exposure. To take out a participating forward contract, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to sell your foreign currency. We will then tell you the level of participation you can potentially benefit from.

How a participating forward works For example, you export materials to the US, and are due to receive USD, in six months' time. You are entitled to sell USD, at 1.

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You are obliged to sell USD, at 1. However, the remaining USD, can be sold in the spot market at 1. This structure provides protection at a pre-agreed 'worst-case' rate with the ability to benefit from a potentially unlimited favourable exchange rate move. There is no cash premium payable for a tracker forward. To take out a tracker forward, you need to advise us of the amount, the currencies involved, the expiry date and the worst rate which you would like to sell foreign currency.

How a tracker forward works For example, you export materials to the US, and are due to receive USD, in six months' time. The tracker forward provides protection to sell USD at a worst-case rate of 1.

However, by the maturity date, you are obligated to sell USD, to HSBC at the prevailing market rate, plus 4 cents, although the net rate cannot be worse than 1. You have the right to sell dollars at the protected rate of 1. Links on this page may allow you to access other websites. Please read the linked websites' terms and conditions. Links on this page may allow you to access another HSBC Group website. Please read the terms and conditions of the linked website, which may differ from the terms and conditions of hsbc.

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Home Products and services Trading and sales Foreign exchange FX derivatives. Importers Tackling currency movements against imports requires tools specially made for import businesses.

Average rate option Transfer all content from: We will then advise you of the premium you need to pay. This product is best explained with an example. Currency options Transfer all content from: Forward extra Transfer all content from: Forward extra plus Transfer all content from: Participating forward Transfer all content from: Tracker forward Transfer all content from: Advantages Provides protection on per cent of your exposure Allows you to benefit from favourable currency moves No premium payable Disadvantages The protected rate will always be less favourable than the forward rate Key facts A credit line is required Available in any currency pair where there is a liquid forward market Important: Exporters Stay focused on business by having the best FX derivatives behind your profits.

You buy an ARO that protects against the average exchange rate for the year rising above 1. Related services Foreign exchange Project and export finance Trading and sales RMB resource centre. Related insights Cashed up and ready to go? China aims for renminbi internationalisation to reduce its reliance on the US dollar. Contact us Can't find it? Tools Forward calculator FX cross rates FX spot calculator Insight centre.

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