For traders who are always on the lookout for opportunities to increase their profit, forex options should not be disregarded, as this is another way to pile those cash into one’s account. However, there is a need for traders to understand its concept before they could actually earn from it.
Forex options come in two types namely the traditional option and the single payment options trading or in short known as the SPOT.
The traditional option is similar with that of a stock option where it gives the buyer the choice to purchase an option with its own price and specified time. The trader can actually earn from this scheme if the price is lesser than the actual period of time when the trader sells it. For instance, if the trader bought an option at 1.4000 then increases to 1.6000 during the time the trader has the chance to sell it, he gains profit. However, if the price goes down below the buying price, the trader losses gain. This option is done through over the counter method for the trader to easily pick his preferred date and price. The trader may also choose to use the American or European traditional style options. If the trader is comfortable to trade at any time until the expiration of the option, he uses the American style. On the other hand, traders who use the option on the day of expiration use the European style.
The SPOT option allows traders to give a scenario before they could earn. For instance, if the trader gives a scenario where the USD/EUR pair breaks in 2 weeks for 1.4000, then the trader will receive cash if this scenario occurs. However, if it will not, then the trader has to bear the premium loss. Traders who are comfortable with SPOT options are likely to earn more because they have a wide variety of scenarios to choose from, besides, it is easy to create a scenario and wait for it to occur. Indeed, this gives the trader a greater chance for profit since the risk is limited to the cost of the option. In addition, traders who are skilled in predicting the future of the forex market are likely to limit some risks involved.
Forex options are usually a savior for traders in times there is political unrest, volatility, economic changes, and other disturbances. This is if you take the chance to act.