Trade Forex Options
Remember George Soros; the one who had broken the British pound and brought the Bank of England to its knees in the early 90s. George Soros made cool $1 Billion profit in a matter of few days by betting on the fact that the British pound was overvalued and Bank of England could not sustain its price for long.
He decided to purchase $10 Billion of puts and calls options by using all their funds assets as collateral. George Soros was willing to gamble everything on a single bet.
His knowledge of the currency markets was perfect. He was sure that his conviction that the Bank of England cannot sustain the overpriced British pound would come off right. Soon other currency speculators also joined. A huge selling pressure on British pound developed. Bank of England could not sustain the selling pressure too long and in a matter of 24 hours had to take British pound out of the European Monetary System and let it float freely.
The price of British pound plummeted. George Soros gamble had worked. The next day, his picture was in almost all the major newspaper with the caption: The Man who broke the Bank of England.
Currency markets are huge. Everyday roughly $3 trillion gets transacted in the forex markets. There are many methods, the traders can use for profiting from the volatility in the currency markets.
As a retail forex trader you can trade any of these contracts: spot, futures and options. Forwards and swaps are two contracts that are also traded in the forex interbank market between large institutions like banks, corporations and hedge funds.
Options are derivative contracts that let you buy or sell an underlying asset at a price called exercise price before a certain date known as the strike date. Unlike futures, you dont have the obligation to actually buy/sell the currency.
The underlying asset in case of the forex options is the currency. Now, forex options give you the right but not the obligation to purchase/sell a certain amount of a particular currency on payment of a premium.
How do you profit from forex options? When the currency price is above/below the strike price, you can exercise your option to buy/sell that currency by buying/selling the currency at the strike price. The difference between the strike price and the currency market price is your profit.
In case, the market price is not above/below the strike price of your forex options contract, you can simply let the options contract expire. You only lose the premium that you had paid for purchasing the options.
There is a very good Non Directional Forex Options Trading Strategy that does not depend on the direction of the market. In other words you dont need to predict whether the currency price is going to go up or down and make your profit regardless.
This is a risk free method but it only guarantees 30-50% ROI. If you are satisfied with this much sure shot return you can try this method. - 23229
He decided to purchase $10 Billion of puts and calls options by using all their funds assets as collateral. George Soros was willing to gamble everything on a single bet.
His knowledge of the currency markets was perfect. He was sure that his conviction that the Bank of England cannot sustain the overpriced British pound would come off right. Soon other currency speculators also joined. A huge selling pressure on British pound developed. Bank of England could not sustain the selling pressure too long and in a matter of 24 hours had to take British pound out of the European Monetary System and let it float freely.
The price of British pound plummeted. George Soros gamble had worked. The next day, his picture was in almost all the major newspaper with the caption: The Man who broke the Bank of England.
Currency markets are huge. Everyday roughly $3 trillion gets transacted in the forex markets. There are many methods, the traders can use for profiting from the volatility in the currency markets.
As a retail forex trader you can trade any of these contracts: spot, futures and options. Forwards and swaps are two contracts that are also traded in the forex interbank market between large institutions like banks, corporations and hedge funds.
Options are derivative contracts that let you buy or sell an underlying asset at a price called exercise price before a certain date known as the strike date. Unlike futures, you dont have the obligation to actually buy/sell the currency.
The underlying asset in case of the forex options is the currency. Now, forex options give you the right but not the obligation to purchase/sell a certain amount of a particular currency on payment of a premium.
How do you profit from forex options? When the currency price is above/below the strike price, you can exercise your option to buy/sell that currency by buying/selling the currency at the strike price. The difference between the strike price and the currency market price is your profit.
In case, the market price is not above/below the strike price of your forex options contract, you can simply let the options contract expire. You only lose the premium that you had paid for purchasing the options.
There is a very good Non Directional Forex Options Trading Strategy that does not depend on the direction of the market. In other words you dont need to predict whether the currency price is going to go up or down and make your profit regardless.
This is a risk free method but it only guarantees 30-50% ROI. If you are satisfied with this much sure shot return you can try this method. - 23229
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in investing, options and forex trading. Read more about Forex Options Non Direction Trading System. Discover a revolutionary new Forex Robot
posted by X - Men @ 6:05 AM
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