Currency options constitute the fastest-growing segment of the foreign exchange market. As of April 1998, options represented percent of the foreign exchange market.
The biggest options trading center is the United States, followed by the United Kingdom and Japan. Options prices are based on, or derived from, the cash instruments. Therefore, an option is a derivative instrument.
Options are usually mentioned vis-à-vis insurance and hedging strategies. Often, however, traders have misconceptions regarding both the difficulty and simplicity of using options. There are also misconceptions regarding the capabilities of options.
In the currency markets, options are available on either cash or futures. It follows, then, that they are traded either over-the-counter (OTC) or on the centralized futures markets. The majority of currency options, around 81 percent, are traded over the- counter. The over-the-counter market is similar to the spot or swap market.
The biggest options trading center is the United States, followed by the United Kingdom and Japan. Options prices are based on, or derived from, the cash instruments. Therefore, an option is a derivative instrument.
Options are usually mentioned vis-à-vis insurance and hedging strategies. Often, however, traders have misconceptions regarding both the difficulty and simplicity of using options. There are also misconceptions regarding the capabilities of options.
In the currency markets, options are available on either cash or futures. It follows, then, that they are traded either over-the-counter (OTC) or on the centralized futures markets. The majority of currency options, around 81 percent, are traded over the- counter. The over-the-counter market is similar to the spot or swap market.
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