Currency Options for Trading Currencies

A currency option is a contract which gives the holder the right to buy or sell a specified currency during a specific period of time . A compulsion to exercise this right does not exist. The classical currency trading (FOREX) differs clearly from the currency option trading. Currency options (also known as currency options) are often used for hedging purposes , while traders prefer currency trading. Foreign exchange certificates and foreign exchange warrants, which are similar in structure to the options, are also widely used. But now back to the currency options.

There are two currency option types: call options and put options . A forex purchase option gives the holder the right to buy a currency while a currency put option gives the holder the right to sell it.

The value of an option on the expiration day equals the value if the holder exercises it on that day. If the value is below the strike price (at call), the bet is lost. The value in any other time (until the expiration date) of the contract term is the "intrinsic value" - it is calculated using the same calculation as on the maturity date (the value of the exercise of the currency option is calculated).

A call option (call option) has an intrinsic value if the market price is higher than the strike price. 

A put option has an intrinsic value if the market price is below the strike price.

If the option contract has an intrinsic value, it means "in the money", otherwise it means "out of the money" or "on the money" (near the strike price). Options are only exercised when they are in the money.

Currency options

Options are valued according to complicated formulas that take into account both the market value of the underlying currency and the fair value . The fair value is calculated according to expected market conditions including volatility (market volatility) and different interest rates between the two currencies. Currency options must be valued low enough to attract potential buyers and high enough to attract potential sellers.

Currency options (currency options) are also often used in foreign exchange trading to minimize risks against unexpected movements in the market. 

When you buy an option (call or put), your losses are limited to the cost of the option. 

Those who sell options receive the option premium (purchase price of the option), but they carry an unlimited risk of loss .

Hedging tools are many different types of currency options. They are often used by internationally operating companies to minimize currency losses due to fluctuations in the foreign exchange market.

There are also a number of financial innovations with various specifications. So there are options (including foreign exchange warrants and foreign exchange certificates) that pay off only one value when a certain issue arrives (for example: US dollar over 1.40, then even over 1.40 a fixed amount is paid out, the concludes Dollars on the expiry day below 1.40 then you lose the complete bet). Betting exchanges also offer such "foreign exchange bets".