Forex Options – Definition and Types
Forex options are options in which the underlying product is a currency pair. They are traded over-the-counter and are call/put type. That is call 1currency/put 2currency. There are mainly two types of forex options available for traders to trade as traditional forex options and SPOT options.
Traditional forex options may be American or European type. They are standard options, which carry the right, not the obligation, to buy or sell specified currencies at set time and price. In case you buy AUD / USD options at 0.7500 in 2 month and the rate is above 0.7500 after one month you can buy AUD by putting USD for just 0.7500. Traditional options have premiums lower than SPOT options but are hard to set and execute.
SPOT (Single Payment Options Trading) options give you choice of selecting/predicting scenarios. If your predictions are right, your option is automatically exercised and you get profit, other wise you loss your premium. The additional choices that SPOT options offer include standard options, one-touch SPOT, no-touch SPOT, digital SPOT, double one-touch SPOT and double no-touch SPOT. But SPOT options have higher option premiums than traditional ones.
Traditional forex options may be American or European type. They are standard options, which carry the right, not the obligation, to buy or sell specified currencies at set time and price. In case you buy AUD / USD options at 0.7500 in 2 month and the rate is above 0.7500 after one month you can buy AUD by putting USD for just 0.7500. Traditional options have premiums lower than SPOT options but are hard to set and execute.
SPOT (Single Payment Options Trading) options give you choice of selecting/predicting scenarios. If your predictions are right, your option is automatically exercised and you get profit, other wise you loss your premium. The additional choices that SPOT options offer include standard options, one-touch SPOT, no-touch SPOT, digital SPOT, double one-touch SPOT and double no-touch SPOT. But SPOT options have higher option premiums than traditional ones.
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