If buying the base currency is needed to implement a hedge, what is the core hedge structure?

In the context of hedging currency risk, when buying the base currency is essential for implementing a hedge, the preferred structure involves using a long call option and/or a long forward contract.

A long call option provides the right, but not the obligation, to buy the base currency at a specified price (strike price) within a designated timeframe. This is beneficial if the market value of the currency rises above the strike price, allowing the investor to capitalize on favorable exchange rate movements while providing a safety net, as the investor can choose not to exercise the option if the currency depreciates.

Additionally, a long forward contract locks in an exchange rate for the purchase of the base currency at a future date, ensuring that the investor is protected against adverse currency fluctuations. This combination of instruments effectively aligns the investor's position with the need to acquire the base currency while mitigating potential losses due to volatility in currency markets.

Alternative options do not support the scenario where buying the base currency is necessary. A long put option and/or a short forward contract would typically be utilized when an investor seeks to profit from a decline in the value of the base currency, which is contradictory to the need to purchase it. A stay-in-the-market strategy lacks the protective characteristics of options and forwards