Have you heard about George Soros; The legendary manager of Quantum Hedge Fund who had made a cool $1 Billion profit from a single bet. In the early 1990s, one day he was sitting in his office discussing currency markets with his associate. Both of them were of the opinion that the British pound was overpriced and Bank of England could not sustain its price for long.
He purchased $10 Billion of puts and calls forex options by gambling all the assets under his control as collateral on a single bet that in the end made history.
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.
Daily more than $3 trillion are transacted in the currency markets. You as a forex trader can profit from the volatility in the currency markets using a number of methods. Forex options is one of the methods
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.
Currency is the underlying asset in forex options. You can purchase a forex options on payment of a certain premium. This is the price that you pay for getting the right but not the obligation to buy/sell a certain currency.
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.
However, in case, the currency market price is below/above the strike price of the forex options; you need not exercise your right to buy/sell. By not exercising the forex options contract, you only lose the premium.
If you want to try forex options then there is a very good forex options strategy that lets you profit regardless of the direction in which the currency market is moving.
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.
He purchased $10 Billion of puts and calls forex options by gambling all the assets under his control as collateral on a single bet that in the end made history.
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.
Daily more than $3 trillion are transacted in the currency markets. You as a forex trader can profit from the volatility in the currency markets using a number of methods. Forex options is one of the methods
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.
Currency is the underlying asset in forex options. You can purchase a forex options on payment of a certain premium. This is the price that you pay for getting the right but not the obligation to buy/sell a certain currency.
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.
However, in case, the currency market price is below/above the strike price of the forex options; you need not exercise your right to buy/sell. By not exercising the forex options contract, you only lose the premium.
If you want to try forex options then there is a very good forex options strategy that lets you profit regardless of the direction in which the currency market is moving.
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.
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in online trading especially options and forex trading. Read more about Forex Options Non Direction Trading System. Discover a revolutionary new Forex Robot
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