Forex options come in many forms. However, only two types are generally utilized by traders. The first is the traditional option and this is the kind most often used. In this form, the buyer has the right to purchase foreign exchange at pre-arranged prices. If at the agreed time the trader uses his option after the currency he wants to buy appreciates, he could sell is own currency at a profit. If the currency depreciates, he only loses what he paid for the option. The second form is known as Single Payment Options Trading (SPOT). The trader makes the terms of the option. It is essentially an intelligent guess of what the trader thinks will happen on the currency market. If the guess is correct, the potential income is without limit and if the guess is wrong, only the amount paid to secure the option is lost.
Forex options along with other types of options have been criticized for being perceived as not producing anything tangible. They have also some very real drawbacks shared with outer kinds of options, including their not having any value beyond expiration and the reduction in value over time that may on occasion destroy and nullify any advances in the movement of currency values.
Forex options along with other types of options have been criticized for being perceived as not producing anything tangible. They have also some very real drawbacks shared with outer kinds of options, including their not having any value beyond expiration and the reduction in value over time that may on occasion destroy and nullify any advances in the movement of currency values.
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