Forex Options Trading

Forex options trading is another avenue that traders can take to make money in the Forex market. This is still a form of Forex trading, but it adds a nice little flair to things. Find out about this form of trading and what it has to offer you.

What is a Foreign Exchange Option?

Let's start out simple. First of all, you have to know what an option is. In the words of Investopedia, an option is

"A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date)."

forex options trading

What Does That Mean?

This essentially means that you are hedging your bets in the Forex market. For example, let's say that you place a "long" order on the EUR/USD pair at a price of 1.4523. You also buy an option contract at the same price. This way, if the price of the pair goes up, you can make money because you are in a long trade. If the price of the pair goes down, you can exercise the option and sell your shares at the price that you got into the trade at.

Transferring Risk

The primary objective of buying a Forex option is so that you can transfer risk to another party. You can say that you will not lose on a trade as long as you have an option protecting you.


The downside of getting involved with options is that they cost money. When you buy an option from someone else, you have to pay an option premium. This is an amount of money to compensate the seller of the option for giving them your risk. The seller can keep the money regardless of what happens. If you do not exercise the option, the option premium is theirs to hang onto.


While some people use these as a way to hedge risk, you can also speculate with them. You do not have to be involved in a trade to buy an option. Some people get involved with Forex online option trading as a way to speculate on what currencies will do. You can exercise them at your convenience to try to make money.

Return From Forex Options Trading to Forex Market

Return From Forex Options Trading to Forex Trading

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