This section of the site looks at forex options with education articles and technical analysis.
Forex options is the safest way to protect yourself while trading in the foreign exchange market. Usually when trading Forex you would exchange one currency for another ie. GBP/USD: exchange the British pound for the US dollar.
Trading Forex Options though gives you the right to set the date and price of a forex trade to some point in the future but not the obligation to do so. So if the market goes against you can back out, and all you’ll lose is the premium you paid to the seller/broker.
Forex Options remain popular to a variety of different investors; from professional investors using forex options in times of important reports or events when the risk and spreads increase in the cash forex markets to the smaller and newer investor with a limited amount to invest. Other profit motivated forex traders use forex options as an alternative to cash simply because they are cheaper as well as options positions have the potential to generate a lot more profit than the same amount in a cash position.
Forex Options are used in a number of different methods, but essentially they are used for: (a) to capture profit or (b) to hedge against existing positions. An option provides you with the right, without the obligation to either buy – placing a Call Option, or sell – placing a Put Option – on a currency pair at a particular price – the strike- at a certain date. A premium is paid upfront to the seller of the option for the right to buy or sell the currency pair. The market conditions at the time the forex option expiry will dictate whether or not you decide to exercise this right.
Using the most traded currency pair – the EUR/USD, lets say that you have purchased the right (the option) to buy EURUSD on or before the date of the 10th July at the price of 1.0532,.
Who said you need thousands of dollars to trade in the forex market?
Thanks to the internet, instantaneous placing of call and put options is now possible. Hence, most binary options contracts have short term expiration so you can see how much profit you received in a matter of hours. Also, trading is so much simpler since you won’t need highly sophisticated tools to determine the level of price change, instead, you only have to predict whether the value of a currency will increase or decrease. Even with a 0.0001 change in the price of the currency, you can now receive as much as 81% payout!
For many investors, forex options trading present a great way to increase profit as well as minimize risk to their portfolio. Most market participants involved in hedging (the act of minimizing risk) are corporations which are engaged in import and export and would like to secure future exchange rates. On the other hand, speculators (investors seeking to increase profit) use forex options to profit in both trending and ranging markets.
Perhaps surprisingly, the forex options market has grown to be the largest option market in the world, overtaking stock options by far. With stocks you can buy and own the stock therefore it seems unlikely to trade with stocks when you won’t actually take possession of them. Forex however is classically quite complicated to trade and understand while forex options have limited steps in order to trade them with predetermined risk and profit.
It is a known fact that the forex market is a very lucrative market. There is a lot of money to be made by just trading currencies from the comfort of one’s home. Having said that, it is also known that to achieve consistency in profitability in forex requires immerse amount of prior preparations in the sense that you need a solid background in forex education and a reliable set of trading tools.In addition, to be able to profit from any trading scenarios, you have to know the DIRECTION of the market movement and the EXTENT of the price movement.
By agreed definition, forex options trading are a contract between two parties, a buyer and a seller, in which the buyer possess the right to buy or sell, but not the legal obligation, a certain amount of a particular currency against another specified currency at a fixed price called the ‘strike price’ on or before the expiry of the option contract. For this privilege, the buyer of the option will pay the seller a one-time lump sum called the ‘premium’.
Anyoption is recognized as the top binary options broker today. Through binary options trading, investors can now enter fixed return contracts allow greater flexibility for traders to test out their strategies through a number of assets which they can trade including stocks, currency, commodities and indices.
With a wide range of contracts to choose from, Anyoption allows traders to diversify their portfolio thereby decreasing their risk.