Participating Forwards
Participating Forwards provide you with a “worst case” global payments rate, while leaving a portion of your investment open to participation in favorable exchange rate movements.
A Participating Forward consists of the purchase of a Call (Put) Option and the sale of a Put (Call) Option for different amounts, but at the same strike price. With a Participating Forward, there can be no upfront cost, as the premium received for the sale of the Put will offset the premium paid for the Call.
The sold Put (Call) Option will be for a lower principal amount than the amount of the purchased Call (Put) Option. This allows for full protection against adverse currency movements, while allowing a pre-defined amount of participation in favorable currency movements.
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