Currency Options Trading To Make It Big!
The rapid expansion of the trading volume in the currency market has led to a rapid expansion in currency options trading market as well. It functions in many ways like the equity options market with a few differences. If the option trader believes a currency price will move higher, he/she will buy calls on the currency. This gives them the right to buy the currency at a set price for a specific amount of time. If prices are trending lower, he/she will buy puts on the currency. This gives them the right to sell the currency at a set price before the option expires.
One type of currency option is the traditional option contract. Since currencies trade in pairs so do currency options. With the traditional option the trader selects the strike price as well as tje expiration date of the option contract. These factors are used by the broker in arriving at the premium they will charge for the trade. If the trader feels the premium is fair the option/options are purchased. An example of an option contract is when the trader feels that the dollar will move higher against the Swiss franc. They will purchase calls on the USD/CHF. If the dollar does move up against the franc, the trader in with a traditional option will exercise the option by buying the dollar at the strike price and turning around and selling it at the current market price to realize the profit.
The SPOT contract is a bit different from the traditional option. It does not have to be exercised in order to realize the profit that has been generated. Just like the traditional contract the trader is the one who selects the strike price and the expiration date. The broker sets the premium based on these two factors. Premiums for SPOT contracts are higher than for traditional options. If you think a currency base price will move down you would purchase puts. If you are correct, the profit will automatically be credited to your account with the broker. If you are wrong, you will lose the premium at expiration.
Premiums on currency options, as mentioned before are set by the broker. The closer the strike price is to the current market price the higher the premium will be. The premium will be higher also the longer the time until expiration. If the currency is experiencing wide swings in price this is likely to raise premium levels as well.
There are a number of reasons people get involved in the currency options trading market. Speculation is the top reason. Pure profit is the motivation. In this high volume market, with it's limitation of risk exposure traders find it easier to take advantage of price changes in the currency market.
Hedging is another reason for using currency options trading. The person buying options may own the currency because of business dealings they have with that country. They are interested in protecting themselves from price swings between the currency and their own country's currency. Options can help to do this.
Traders can sell options as well. They receive the premium. If the option expires rather than being exercised the person makes a small amount of money. Due to the higher risk exposure, the broke will require a much higher capital deposit on these types pf transactions.
The currency options trading market is growing at a fast pace. Traders get involved because the lower capital requirements and the limited loss potential. If you develop sharp trading skills large profits can be made in this market. - 23305
One type of currency option is the traditional option contract. Since currencies trade in pairs so do currency options. With the traditional option the trader selects the strike price as well as tje expiration date of the option contract. These factors are used by the broker in arriving at the premium they will charge for the trade. If the trader feels the premium is fair the option/options are purchased. An example of an option contract is when the trader feels that the dollar will move higher against the Swiss franc. They will purchase calls on the USD/CHF. If the dollar does move up against the franc, the trader in with a traditional option will exercise the option by buying the dollar at the strike price and turning around and selling it at the current market price to realize the profit.
The SPOT contract is a bit different from the traditional option. It does not have to be exercised in order to realize the profit that has been generated. Just like the traditional contract the trader is the one who selects the strike price and the expiration date. The broker sets the premium based on these two factors. Premiums for SPOT contracts are higher than for traditional options. If you think a currency base price will move down you would purchase puts. If you are correct, the profit will automatically be credited to your account with the broker. If you are wrong, you will lose the premium at expiration.
Premiums on currency options, as mentioned before are set by the broker. The closer the strike price is to the current market price the higher the premium will be. The premium will be higher also the longer the time until expiration. If the currency is experiencing wide swings in price this is likely to raise premium levels as well.
There are a number of reasons people get involved in the currency options trading market. Speculation is the top reason. Pure profit is the motivation. In this high volume market, with it's limitation of risk exposure traders find it easier to take advantage of price changes in the currency market.
Hedging is another reason for using currency options trading. The person buying options may own the currency because of business dealings they have with that country. They are interested in protecting themselves from price swings between the currency and their own country's currency. Options can help to do this.
Traders can sell options as well. They receive the premium. If the option expires rather than being exercised the person makes a small amount of money. Due to the higher risk exposure, the broke will require a much higher capital deposit on these types pf transactions.
The currency options trading market is growing at a fast pace. Traders get involved because the lower capital requirements and the limited loss potential. If you develop sharp trading skills large profits can be made in this market. - 23305
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To REALLY make a big splash in currency options trading you MUST read a good currency trading tutorial!