Currency Options Trading - Home
Hello and welcome to another of my trading and investing sites which I hope will help you give you help, information and advice, on how to trade currency options. Now let me say straight away that currency options are certainly not for novice traders or beginners, but just as you can buy and sell equity options in the stock market, you can also buy and sell currency options in the FOREX market.
My name is Anna and having been involved in trading and investing for over fifteen years, and I now trade currency full time for a living. Over the years I have seen many scams, overpriced 'free seminars' and get rich quick schemes, which are always aimed at the novice investor or newbie. In order to try to redress the balance a little, I have developed several sites such as this, which provide a free resource and information site, for both new and experienced traders. I hope you find this site on currency options both useful and informative, and if you have any questions please just drop me an email, via the Ask Anna button in the navigation bar - I will always respond so please keep in touch.
OK - so let's get started looking in detail at currency options and how accessible, safe and realistic they are for the small retail trader. If you are new to the world of options, and the terminology, then I would urge you to visit another of my sites, which explains all you need to know about options trading and how they are traded. Whether you trade in stock options, or currency options, most of the terms and underlying contract explanations are inter-changeable, so please start there if this is new territory, as the following will then become much clearer. One of the differences is that currency options are now moving towards 24 hour trading in line with the spot fx markets.
Currency Options Trading - Introduction
Many people think of the stock market when the word options is mentioned,
however the forex market also offers the opportunity to trade these unique
instruments which bridge the various worlds of interbank exchange, retail
forex and currency derivatives. Trading in currency options started in the
late 1970's and early 1980's in the established futures exchanges in London,
Philadelphia and Chicago. At the time these were purely designed for the
major banks to offer to international clients as hedging instruments, when buying and
selling significant sums of foreign currency. These were typically where
goods or services required payment in the future, but with a foreign
currency, and generally where large sums of money were involved. In simple terms the option
contract set the price for the currency at some point in the future, thus
allowing the company to remove the risk of having to pay more, should the
exchange rate move unfavourably by the due date for payment. Of course this also
removes the chance that the rate might go in your favour, making the payment
cheaper, but in general large companies are not interested in currency
speculation, but in fixing future costs.
A major change occurred in the early 1990's as currency options moved into the mainstream world and were soon widely adopted on the trading floors and exchanges, and trading in more unusual options began to develop at a rapid pace. However, these trading instruments still tended to be the preserve of specialist professional traders with significant cash reserves, and with real cash changing hands for physical delivery of the option contracts.
The recent dramatic growth in online trading for the small retail speculator, is having a knock on effect into the world of currency options, as brokers and exchanges are starting to see the opportunities to develop what is a relatively new market, for both traders and investors. The problem of course is that as any new markets evolve and develop, different people use different terms to mean the same thing, making it almost impossible for the inexperienced trader ( or even those in the industry) to make sense of all the terminology. I have therefore tried with this site, ( as with all my others ) to explain things as clearly and as simply as possible, the terms, the markets, the potential risks and rewards, but I can honestly say that this is one of the most difficult so far - the reason is simple - in a developing market new entrants like to try to differentiate their product or service, by calling it something different, introducing yet more confusion. In addition, as I'm sure you already know, the forex market is largely unregulated, so almost anything goes ( and generally does!) - the same applies to currency options, and seems likely to continue, if and until the entire market is regulated ( which is unlikely in the near future! )
So here goes - I will try to explain in clear, simple and logical steps, the world of currency options trading as I understand things at the moment!
Currency options trading - next page
