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Use of options as hedging tool for forex fluctuations is growing

Tuesday, December 06, 2011

Misys plc, a company that supplies IT solutions to the top 50 banks, released a statement on December 6 indicating that an analysis of client use of one of the company applications revealed that the use of options as a foreign exchange hedging tool is on the rise.

The IT solutions firm performed the client analysis using Misys Confirmation Matching Service. The numbers generated for 2011 showed a strong gain in the use of options by fund management and corporate clients.

"These are certainly increasingly difficult times for corporates to manage and mitigate FX risk," Stefan Lind, Group Treasurer at Saab AB., said in the statement. "We have found that we are increasingly hedging that risk with the use of FX options."


The firm utilized a sample of 130 firms from its more than 1,000 clients and compared the volume of options matched through its CMS in September 2011 and the same time in 2010. The number of matched trades spiked by more than 100 percent.

The statement contains speculation that the upswing in options as hedging tools is a result of companies rethinking their risk-management strategies in light of the European debt problems. Investors working with discount brokers might benefit from reading reports on derivatives. 

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