Writing covered options is safe, and can earn money, as long as the company has the underlying currency to deliver. Buying puts or calls to hedge a known foreign currency exposure offers upside potential without the risk of speculating on the currency. Options can be the best hedge for accounting exposure. Options offer a useful way to hedge foreign currency exposures without the risk of reporting derivative exposures. Selling an option is better than using forwards or swaps when the counterparty is risky, because the option buyer cannot default.
Currency options offer the ideal way to hedge uncertain exposures such as contract bids.
Covered Calls are Safe. When Dell Computer Company was found to be selling naked currency puts and calls, Michael Dell was condemned for speculating with company money. To escape similar criticism many managements have gone on record as admitting only to covered option writing. Here are the words of Rolls-Royce brass on this topic. What Rolls-Royce fails to recognize is that covered option writing is just as risky as naked option writing.