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
- 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.
- While trading in forex Options, even if you encounter losses but the market is bullish near expiration, you still get to keep the premium.
- 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.
- 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.
- Anticipating the market and covering your losses are the factors that can influence you to sell a call.