Option-Dated Forward Contract
What is an Option-Dated Forward Contract?
An Option-Dated Forward Contract is similar to a regular Forward Contract in all respects except that the owner of the contract can settle it at any time within a pre-set 30-day period. The total amount of the contract can be settled in increments within that period until the entire amount is delivered. Option-Dated Contracts are available in all commonly traded currencies.
What are the benefits?
An Option-Dated Forward Contract lets your company eliminate downside risk by setting a price today for a foreign exchange transaction at a future date.
This gives you all the advantages of regular Forward Contracts, plus the added flexibility of consolidating a number of small forward requirements into one larger contract which can be more convenient and cost-effective.
An example
Suppose that on January 2, your company believes it will have to buy the following U.S. Dollar amounts in the month of February:
| February 1 |
$300,000 US |
| February 10 |
$250,000 US |
| February 28 |
$450,000 US
----------------- |
| Total |
$1,000,000 US |
If you’re sure of the day you will require each amount, you can enter into a single Forward Option Contract which allows you to fix the price on January 2 and then take delivery of the U.S. Dollars on the days you have specified.
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Foreign Exchange Calculator
The calculator should be used for indicative rates only and does not necessarily reflect the rates at which TD would be prepared to enter into any transactions with a customer. Customers who deal directly with Business Banking Foreign Exchange should inquire on TDFX or through their Foreign Exchange Specialist to receive rates tailored to their circumstance. TD assumes no liability or responsibility for any reliance or use that a customer may place on or make of the calculator.
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