Answer - No, this is not the correct answer.

Because this strategy will make a loss to the company if the € value moves extremely to the positive direction and increases heavily in its value than the company's expectations of the adverse market (Explained Below)

Explanation:

Case1: Let's consider the strategy you have mentioned the above question -  Buying an OTC put option on € with strike price K1 and selling an OTC call option on € with a strike price of K2 where K1<F<K2

• This strategy will definitely profit the company if the € decreases in the market value, when the € value decreases the Company can exercise their put option at K1 but
• Let's assume the € value increases way beyond K2 then the buyer of the call will exercise their call option at K2 and you will make a loss, whereas you could have sold € at a value more than K2 in case you hadn't sold a call option.
• Let's assume the € value doesn't increase beyond K2 then the buyer of the call option won't exercise their call option and you will make a premium on the sale of the call option.
• Hence as a company, you aren't hedged to a position to protect yourselves from the extreme increment in € value in case the market value of € goes beyond K2.

So now as a company which strategy should you use to protect yourselves from both increase or decrease from the expected future value of €? Let's discuss that in case 2

Case.2: Let's use a straddle strategy where the company buys both put option (K1) and call option (k2) at the same strike price F.

• Let's assume the € currency moves extremely below the expected future price (Future Spot Price<F) then the company can exercise their put option at F and protect themselves from an adverse market.
• Let's assume the € currency moves extremely above the expected future price of € (Future Spot price>F) then the company can buy more € at the price of F and sell it a price in the future spot market at price higher than F and make profits.
• Hence the strategy of the straddle will help the company from both the extreme rise and fall of the currency in both positive and negative direction.

Hence strategy to be used - Buy OTC call option at a strike price K1 & buy a put option on € with strike price K2 which can be stated as

K1=F=K2 this strategy is called straddle.