A currency option is a contract between a buyer and a seller that gives the buyer the right, but not the obligation, to trade a specific amount of currency at a predetermined price and within a predetermined period of time, regardless of the market price of the currency; and gives the seller, or writer, the obligation to deliver the currency under the predetermined terms, if and when the buyer wants to exercise the option.
Currency options are unique trading instruments, equally fit for speculation and hedging. Options allow for a comprehensive customization of each individual strategy, a quality of vital importance for the sophisticated investor.
More factors affect the option price relative to the prices of other foreign currency instruments.Unlike spot or forwards, both high and low volatility may generate a profit in the options market.
Currency options are unique trading instruments, equally fit for speculation and hedging. Options allow for a comprehensive customization of each individual strategy, a quality of vital importance for the sophisticated investor.
More factors affect the option price relative to the prices of other foreign currency instruments.Unlike spot or forwards, both high and low volatility may generate a profit in the options market.
For some, options are a cheaper vehicle for currency trading. For others, options mean added security and exact stop-loss order execution.
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