By Clint BTrading a currency option is another way to create earning opportunities. It allows you to trade in whatever amount and whatever cost you desire. This sounds high risk but the potential of earning huge amount of money is likewise high.
Currency option trading is a popular forex technique that enables you to buy and sell existing right to buy and sell foreign currency. This option is not available to everyone because the process is a bit complicated and it takes time to master the strategy.
An Option is a contract in which the buyer, also called the owner, is given the right to buy or sell an asset at a definite price within a determined timeline. The asset can be currencies, stocks and commodities.
The newest trading currency option involves preference of a particular date at which you anticipate changes in the currency value of the asset. Unlike foreign exchange trading, what the investor is buying is the option to trade currency and not the foreign currency itself.
The process of currency options starts by choosing a currency pair such as USD/EUR, GBP/JPY, USD/CHF and USD/CAD. Depending on your expectation on the currency value or rate of each pair, you may opt to buy either a call option or a put option.
You will have to choose the call option if you suspect that the market price of the asset will likely to increase over and above the strike price. The strike price is the value at which the currency option is traded. Choosing the call option will permit the owner to buy the asset in a lower price than its current value.
If you believe that the market price will plummet, then you have to choose the put option. This option will allow you to sell the asset at a higher strike price than the present price.
The next step is to decide an expiry date. The option you have chosen may expire at the nearest closing hour or probably at the end of a day, week or month. It all depends on how you analyze the currency rates in relation to your chosen expiry date.
Currency option trading is a popular forex technique that enables you to buy and sell existing right to buy and sell foreign currency. This option is not available to everyone because the process is a bit complicated and it takes time to master the strategy.
An Option is a contract in which the buyer, also called the owner, is given the right to buy or sell an asset at a definite price within a determined timeline. The asset can be currencies, stocks and commodities.
The newest trading currency option involves preference of a particular date at which you anticipate changes in the currency value of the asset. Unlike foreign exchange trading, what the investor is buying is the option to trade currency and not the foreign currency itself.
The process of currency options starts by choosing a currency pair such as USD/EUR, GBP/JPY, USD/CHF and USD/CAD. Depending on your expectation on the currency value or rate of each pair, you may opt to buy either a call option or a put option.
You will have to choose the call option if you suspect that the market price of the asset will likely to increase over and above the strike price. The strike price is the value at which the currency option is traded. Choosing the call option will permit the owner to buy the asset in a lower price than its current value.
If you believe that the market price will plummet, then you have to choose the put option. This option will allow you to sell the asset at a higher strike price than the present price.
The next step is to decide an expiry date. The option you have chosen may expire at the nearest closing hour or probably at the end of a day, week or month. It all depends on how you analyze the currency rates in relation to your chosen expiry date.
The last step of currency option trading is to determine the amount you are willing to invest and then wait for the expiry date. The option you made whether to put or call is subject to finality. You cannot alter it anytime you choose because you have to wait for the expiry date which locks your investment. As always, use caution when trying to use any forex arbitrage strategy.
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