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What does Long Call EURUSD mean? Does it mean Long Call EUR and Short Put USD? When we draw payoff do we consider only w.r.t. to CCY1 i.e. EUR in this case?

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    $\begingroup$ You bought a call option on EurUsd pair, at maturity you have the option to buy one Euro for K (strike) dollars. Think of the EurUsd rate as the stock price, euro as the stock and dollar as the money to translate this into the stock options terminology. $\endgroup$ Oct 7, 2019 at 11:47

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First please keep in mind that EUR (and GBP) are quoted "cable". So if the USD EUR exchange rate is quoted as 1.1, for example, that means that (quotation or countercurrency) USD 1.1 = (base currency) EUR 1. Most other currencies are quoted the other way, so if the USD CHF rate is 1.1, that means CHF 1.1 = USD 1.

An investor is "long" an option means that the investor has bought the option, paid a premium, and now has the right, but not the obligation to exercise the option.

If you're long a EURUSD option with the strike 1.1, and you can exercise when the spot rate is 1.2, then your option is in the money. You will pay USD notional (you're effectively long a USDEUR put..) and receive EUR notional (= USD notional / strike), which will be more EUR than you would have received using the spot rate in the market.

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You would actually sell the option to yourself if you were long a Call on EUR and short a Put on USD.

FX is quoted as CCY1CCY2 (e.g. EURUSD) where it shows the amount of CCY2 needed to buy/sell 1 unit of CCY1. In terms of options, the standard Black Scholes model (called Garman Kohlhagen in FX) has Notional in CCY1, but price in CCY2. The call and put position refers to CCY1. A EUR Call is equal to a USD Put and you do not swap the direction from long to short (that would be at the other side of the market).

Hence, if you want a Call on EUR you just need to buy a Call option. You can see in the screenshot below that a Long EUR Put is identical to a Long USD Call (or Long USD Put is equal to Long EUR Call).

enter image description here

You can look here if you know some basic coding and are interested to compute the values yourself.

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