Forex options market started as an over-the-counter (OTC) financial instrument for banks, financial institutions and large international corporations to hedge against currency risk. As the forex spot market, foreign exchange options is considered an "interbank market. But with plenty of real-time financial data and forex trading software option available to most investors through the Internet, today's market forex option now includes a growing number of individuals and corporations who are speculating and / or hedging currency exposure via telephone or online forex platforms trading.
Forex option set - A currency option is a financial currency contract giving the forex option buyer the right but not the obligation, to buy or sell a foreign exchange spot contract specific (underlying) to a specified price (exercise price) or before a certain date (expiry date). The amount of binary option buyer pays the seller for the binary option rights forex option contract is called the forex option "premium."
Forex Option Buyer - The purchaser or holder of a currency option has the choice either to sell the currency contract option before it expires, he or she may choose to hold the currency of the contract until the end of options and to exercise its right to take a position in the currency of the underlying foreign. It is the exercise of the option and taking the subsequent underlying position on the spot market of foreign currency is known as "transfer" or "assigned" a spot position.
The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller at the front when the currency option is initially purchased. Once the premium is paid, the holder of foreign currency option has no other financial obligation (no margin is required) until the currency option is either offset or expires.
On the date of expiration, the option buyer can exercise his right to buy the underlying position of the spot exchange currency at a strike price of options in foreign currencies, and sales support can exercise their right to sell underlying position of the currency in cash at the exercise price of options in foreign currencies. Most of these currencies are not exercised by the buyer, but are offset in the market before maturity.
It expires worthless if, at the time of the foreign currency option expires, the exercise price is "out-of-the-money." In simple terms, a currency option is "out of money" if the underlying spot price of foreign currency is below the exercise price of an option to purchase foreign currency, or the spot price of the underlying foreign currency is greater than the put option strike prices. Once a currency option has expired worthless, the option contract currency is over and neither the buyer nor the seller shall have no further obligation to the other party.
Forex negotiable option - seller of the option to change may also be called "writer" or "founder" of a contract foreign currency option. The seller of a currency option is contractually obliged to take the opposite underlying foreign exchange exposure to foreign currency accounts if the buyer exercises his right. In exchange for the premium paid by the buyer, the seller bears the risk may be a disadvantage at a later date in the currency spot market.
Forex option trading has become an alternative investment vehicle for many traders and investors. As a tool for investment, forex option trading provides both large and small investors with greater flexibility in determining the proper forex trading and hedging strategies to implement. Most forex option trading is by telephone, because there are only a few forex brokers offering online forex option trading platforms.
The currency option seller must have the funds in its account to cover the initial margin requirement. If markets move in a direction favorable to the seller, the seller does not need to send more funds to its foreign currency options other than the initial margin requirement. But if the markets move in a direction unfavorable options seller, the seller may need to send additional funds for its foreign exchange account of foreign trade to keep your account balance in foreign exchange trade-in above the maintenance margin requirements.
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