Currency Option
A currency option is the right (but not an obligation) to purchase or sell an agreed amount of a particular foreign currency at an agreed rate of exchange, at the expiry of, or during a specified period of time.
Who is this facility for?
Importers and those with known commitments such as dividends, management fees, gratuities, interest and principal repayments etc, who wish to fix the kwacha value of USD, GBP, ZAR, EUR etc.
What are the advantages?
- Protection against currency exposure, exchange rate movements, devaluation, revaluation etc
- Costing is effective and determined in advance
- For importers, in a country like ours, whereby there is a period when foreign exchange is scarce, ensures availability when needed.
How does it work?
- Clients apply for an option (purchases only for the time being)
- Clients advise the bank the price at which they would like to buy the Forex at a determined future date
- NBM calculates and quotes the option premium
- Both parties sign a contract detailing the amount, rate, premium payable and delivery date.
- A non-refundable premium is paid when the deal is concluded
- Exchange of currencies takes place on or before the agreed date.
