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Selling of Options

Forex Options allow the buyer to cite a premium based upon a specific scenario.
Selling an Option means that the holder/ buyer can sell his Options anticipating two types of market conditions.

  • If the market is steady, the holder can keep the quoted premium.
  • If the market is volatile or follows the direction at which you’ve forecasted, you earn huge returns.

As Forex trading is not suitable for traders looking for long-term options, but for a short span. The advantage of a short Spot trade is that the buyer/trader makes attractive profits during a season when market experiences a downward trend.
To garner outstanding profits selling Options can be done in both, the bearish as well as bullish markets.
If you sell a call, you sell an option when the market is bearish and you want the value of the call to fall and it expires worthless.
If you sell a put, you sell an option when the market is bullish and you want the value of put to fall but market to rise.
Salient features of Selling Options

  1. You sell an option which implies that you’re being paid a premium while opening the trade. If the market is bullish and rises above your quoted price, you lose money. The market closes at expiry at a value on or below the strike price; you get to keep the entire premium.
  2. While trading in forex Options, even if you encounter losses but the market is bullish near expiration, you still get to keep the premium.
  3. The forex Options’ premium which has a time value attached, reduces in value the more you get closer to the expiration & the more market trends down.
  4. You can decide when to exit when dealing with these Options. If you want you can exit the trade by selling a call at a cheaper price when the market has fallen & also the call has fallen to a desirable level. You can then decide on buying another call for a larger premium just wait for the call to expire and keep the premium.
  5. Anticipating the market and covering your losses are the factors that can influence you to sell a call.