How to Understand Forex Options & Forex Options Trading

Forex option trading (or currency option trading) is when an owner enters into a contract to trade one currency in exchange for another, hoping to make a profit as the currency rates against each other fluctuate. The option is bought at a set price and within a specified time frame. With anyoption™, a trader can profit as much as 70% if the trade expires in the money. Even if the option expires out-of-the-money, then anyoption™ pay back 15% of the principal investment.

Steps

1. Forex option trading is when an owner (or buyer) enters into a contract to purchase currency at a fixed price at a specified time in the future. The owner does not buy the currency itself, rather the option to buy it. A forex option is a type of binary option. This means that the potential gain or loss is determined on the onset of the contract and it is set by the amount invested by the owner.
   
2. In forex option trading there are only two possible outcomes: or the option expires in-the-money and the owner receives a 65-71% payout; or the option expires out-of-the-money and the owner receives nothing. However, if forex option trading is carried out with anyoption™, an owner receives 15% back if his option expires out-of-the-money.
   
3. Currency options are traded in pairs e.g. USD/EUR, GBP/JPY. The first currency is known as the ‘base’ currency and has a value of 1. The second currency is called the ‘quote’ currency and its value states how much of the quote currency is needed to buy one unit of the base currency. For example, if the currency pair is USD/JPY = 94.70 then it costs 94.70 yen to buy 1 US dollar. As the US dollar becomes stronger, the number 94.70 will increase as it takes more yen to buy 1 US dollar. Forex option trading is based on fluctuations between different currencies and the constantly changing rates between the different possible currency pairs. An investor interested in forex option trading can easily become a successful trader by gaining knowledge on currencies and their movements in relation to one another.
   
4. A buyer can trade forex options on an online trading platform such as anyoption™ which is a new binary option trading platform available for private and institutional investors worldwide. It is 100% web based, and does not require software download or any other previous trading experience. The interface is self explanatory and easy to use, the range of assets that options are offered on is incomparable and the speed and accuracy of settlements is flawless. The most advanced and stable technologies are used to ensure the safety and satisfaction of traders.
   
5. Anyone can start trading immediately, by opening an account with anyoption™ and depositing money. The process is simple:
   
6. Select the currency pair which you would like to trade on e.g. USD/EUR, GBP/JPY.
   
7. Choose how much you want to invest on the selected forex option. This can be anything from $50 to $3,000 (or equivalent), though multiple trades can take place at the same time.
   
8. Decide if you want to make a call option or a put option. If you buy a call option then you predict that the rate of the currency pair will increase (i.e. more of the quote currency will be needed to buy the base currency). If you buy a put option then you predict that the rate of the currency pair will decrease (i.e. less of the quote currency will be needed to buy the base currency).
   
9. Choose your expiration date – do you want the option to expire at the end of the nearest hour or at the end of the day, week or month?
   
10. Wait for the expiry level of your currency option to be finalized – this will be displayed in the trading box. If your option expires in the money then you will make between 65%-71% profit. If your option expires out-of-the-money then you will get 15% of your initial investment back.
    
11. The benefits of forex option trading make it a preferred investment for many traders, over traditional forex trading. This is for several reasons:
    
12. The risk is known from the onset of the contract since the owner cannot lose more than he invested in a trade, hence he is in full control and has full knowledge of any risks.
    
13. Since the option need only move by a 4th decimal point above or below the strike price, an investor need only invest a small amount to profit highly, since it is not the magnitude of the move which is important.
    
14. Being able to select the currency pair, expiration time and call or put option, makes forex option trading a flexible method of trading
    

Tips

• For more information on binary option trading on currencies, indices, commodities and stocks, visit www.anyoption.com where anyone can trade.
  

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