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Mini Options on U.S. Dollar Spot

  • The product

    The U.S. Dollar is represented by the exchange rate between the United States Dollar and the Brazilian Real and may vary according to the flow of U.S. Dollars within Brazil. This variation occurs in several ways, such as foreign investments in the country, the entry and exit of U.S. Dollars through the financial flow generated by imports and exports, economic conditions, international interest rates, and through the Central Bank of Brazil’s involvement in trading U.S. Dollars in the domestic market, among other ways, thus arising the need for mechanisms to limit the risks of price fluctuation.

    The Mini Options on U.S. Dollar Spot are derivative instruments with a smaller round-lot than full, more affordable options and were created to mitigate market price risks of institutions with assets/liabilities benchmarked to the U.S. Dollar. This not only provides a hedging mechanism to protect the market against possible losses, but also serves to create speculative price strategies and increase the exposure and the return potential of an investor.

  • Specifications
    UnderlyingThe exchange rate of Brazilian Reals (BRL) per U.S. Dollar (USD).
    TickerWDO
    Contract sizeUSD 10,000.00
    QuotationOption premium in BRL per USD1,000.00, to three decimal places.
    Tick sizeBRL0.001 per USD1,000.00.
    Round-lot1 contract
    Last trading dayLast trading day preceding the expiration date.
    Expiration date1st business day of the contract month.
    Contract monthsAll months.
    Option exerciseOn the expiration date, the option exercise is performed automatically by B3, subject to the following conditions:


    Call option:

    a) If the result of the difference between the settlement price of the underlying contract and the strike price for the principal investor is positive; and
    b) The principal investor fails to register on the trading system its intention not to exercise its call option on the expiration date.


    Put option:

    a) If the result of the difference between the strike price and the settlement price of the underlying contract for the principal investor is positive; and
    b) The principal investor fails to register on the trading system its intention not to exercise its put option on the expiration date.
  • Benefits
    • Hedging against exchange rate changes.
    • By combining various options, strategy figures can be created to enable hedging against/speculating with exchange rate changes.
    • No need for collateral deposit for holder positions.
    • Upon premium payment, there is no cash flow to the parties regarding daily settlements.