Series 7 - General Securities Representative Exam

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A US importer is buying $1,000,000 worth of dry goods from a French Manufacturer. The payment will be made 3 months from now in Euros. To hedge against currency fluctuation, the US importer would do which of the following?

Buy Calls On The Euro Currency
Buy Puts On The Euro Currency
Buy Calls On The US Dollar
Buy Puts On The US Dollar


Importers buy calls in the foreign currency to hedge currency risk. The importer is concerned that the dollar will lose value against the Euro over the next 3 months. Buying Euro Currency calls will hedge this risk. The Dollar index (DXY) is measured against a basket of multiple foreign currencies and would not hedge strictly Euro exposure