indirect currency hedge

Why buying options or futures on the foreign assets can enjoy the benefits of realize the gain on the underlying

foreign assets without incuring currency exposure? because the transaction is domestic currency?

because you only post collateral ( for futures ) or pay premium ( for option ) instead of putting the whole capital to a transaction exposure to the currency.


the future will give you a pay off in the foreign currency, so if you are exposed to 1 000 000 and finish at 1 100 000, then the future will give you 100 000

the 100 000 is the only exposure you got to the currency since you will need to turn it back into domestic currency.

in the other hands if you had purchase 1 000 000 stocks, you would have needed 1 100 00 to transfer back into the domestic currency. which is much more exposure.

thanks for the answer