Hedging Currency Exposure: Forwards vs. Options

ABC Corporation, a US-based manufacturer, exports goods to Europe and receives payments in euros. As the company prepares for a significant shipment scheduled in three months, it faces the risk of euro depreciation against the US dollar, which could negatively impact its revenue. The current exchange rate is 1 EUR = 1.10 USD.

In order to hedge this currency exposure, the CFO is considering using a forward contract to lock in the current exchange rate for a future date. The CFO also contemplates the possibility of using options as a hedging strategy, particularly a put option on the euro, which would give the company the right, but not the obligation, to sell euros at a predetermined strike price.

Discuss the advantages and disadvantages of using forward contracts versus options for hedging ABC Corporation's euro exposure. Include considerations related to cost, risk management effectiveness, and potential impact on the company's financial statements.