DERIVATIVES AND HEDGING ACTIVITIES:

Fair Value of Derivative Contracts

The fair value of derivative contracts as of December 31, 2017 and 2016 was as follows:



	Other current assets		Other accrued liabilities		Other current assets		Other accrued liabilities
	December 31, 2017				December 31, 2016
	(in thousands)
Derivatives designated as hedging instruments
Currency forward and option contracts	$	980	$	—	$	257	$	999
Derivatives not designated as hedging instruments
Currency forward and option contracts	2		17		—		7
Total derivatives	$	982	$	17	$	257	$	1,006

The gross notional amounts of derivative contracts were NIS denominated. The notional amounts of outstanding derivative contracts in U.S. dollar at December 31, 2017 and 2016 were as follows:



	December 31,		December 31,
	2017		2016
	(in thousands)
Derivatives designated as hedging instruments
Currency forward and option contracts	$	52,380	$	105,730
Derivatives not designated as hedging instruments
Currency forward and option contracts	$	47,015	$	34,330

Effect of Derivatives Designated as Hedging Instruments on Accumulated Other Comprehensive Income (Loss)

The following table represents the unrealized gains of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income (loss) as of December 31, 2017 and 2016, and their effect on OCI for the year ended December 31, 2017 (in thousands):



December 31, 2016	$	(692	)
Amount of gains recognized in OCI (effective portion)	8,651
Amount of gains reclassified from OCI to income (effective portion)	(7,034		)
December 31, 2017	$	925

Foreign exchange contracts designated as hedging instruments primarily relate to operating expenses and the associated gains and losses are expected to be recorded in operating expenses when reclassified out of OCI. See Note 11 for the amounts recorded in each operating expense account. The Company expects to realize the accumulated OCI balance related to foreign exchange contracts within the next twelve months.

Effect of Derivative Contracts on the Consolidated Statement of Operations

The effect of derivative contracts on the consolidated statement of operations in the years ended December 31, 2017, 2016, and 2015 was as follows:



	Derivatives designated as hedging instruments							Derivatives not designated as hedging instruments
	Year Ended December 31,							Year Ended December 31,
	2017		2016		2015			2017		2016		2015
	(in thousands)
Operating income (expenses)	$	7,034	$	623	$	(3,630	)	$	—	$	—	$	—
Other income	$	—	$	—	$	—		$	3,248	$	384	$	—