Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites.
Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. For avoidance of any doubts and to make it easier, you may consider any links to external websites as sponsored links. Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

What are Forex Options

Forex Options:
Not only does the stock market provide you with options, the forex market also has options to offer. The options perform the role of securities for a forex trader to limit their risks and hence increase profits.
Types of Options:
Options can be classified under 2 broad categories-

  • Call/ Put Options: These options give the right to the trader to buy or sell an asset during a specific period of time at a fixed price. At no time will the trader be accountable to buy or sell his options. He can even choose to keep the options till it expires. When we talk about Forex Options, we refer to the underlying assets (or currencies) to be bought or sold with another currency.
  • SPOT Options (or Single Payment Option Trading): These Options have a different mode of operation. Here the investor (or buyer/holder) is quoted a premium depending upon a scenario given to the broker. A scenario can be a currency exchange, an exchange rate and time duration. The moment the scenario is established, the holder receives a payout.

The Option conversion is in the form of cash. The SPOT Options differ from traditional Options as they offer an increased number of choices, easy to purchase, and above all automatic payout. The only shortcoming of SPOT Options over traditional Options is higher premiums.
Advantages and Disadvantages of Trading Options
The Forex Options create an appealing environment for the traders to trade in.
Let us take a glance at some positive features –

  1. The premium price paid when the Options are purchased is more compared to the investment risks involved.
  2. These Options increase the potential profit margins.
  3. The upfront payments charged by SPOT Options are lower than the other forex Options.
  4. Once purchased, the buyer can choose the rate and expiration dates of these Options.
  5. They reduce the risks due to losses by creating a safe haven for the cash positions.
  6. Options which follow the predicted market movement can be purchased on reduced upfront cost and minimal risks.

Disadvantages –

  1. The premium quoted is influenced by the risk ratio anticipated by strike price and Option expiration.
  2. SPOT Options cannot be negotiated once purchased.
  3. Timing plays an important role on the Options based on their expirations.
  4. If you’re looking at a healthy long-term financial strategy, Options are not the right choice.