Market Conventions : OPTION PRICE

How should one ask for an option price? The required pieces of information, in the preferred order, are as follows:

• The two currencies involved and which is the put and which is the call, e.g. dollar put, Swiss
  franc call;
• The period, e.g. two months or the expiry or delivery date, e.g. expiry 12 December, for
  delivery 14 December;
• The strike, e.g. 1.5010;
• The style, e.g. European or American style;
• The amount, e.g. 10 million dollars.

There are many ways of stating the period, but usually, if one date is stated, it is assumed to be the expiry date but it is much safer always to specify. In the same way, if a 10-day option is requested, it is assumed that the required option has an expiry date 10 days from the current date. If, however, an option is requested with a period in terms of months or years, e.g. three months, the dates of the option are worked out as follows:

• Calculate the spot foreign exchange date for that currency pair, using the same conventions as the spot foreign exchange market.
• Take the period, e.g. three months from that date, using the forward market conventions.

This gives the delivery date. The expiry date will then usually be two working days before that. The exceptions occur in any currency pair where spot is not two working days, for example the Canadian dollar, where the expiry date would be one working date before the delivery date.
Please note that with cross currencies and dates involving American holidays or in any cases where there may be confusion, it is always best to quote both the expiry and delivery dates required.
In asking for an option price, always state which currency is the call and which is the put. For example, does dollar/Swiss franc ($/sfr) put mean a dollar put or a Swiss franc put? On the option exchanges and in the OTC interbank market, this would usually refer to a Swiss franc put/dollar call. However, most corporations would probably mean a dollar put. For this reason, always state the case in full, e.g. dollar/call Swiss franc put or vice versa.