Should I Buy Iraqi Dinar Options, Reserves, or Layaways?
Iraqi Dinar Options
Should You Buy Iraqi Dinar Options?
First off what is an Iraqi Dinar option? Where as majority of people prefer to buy the physical Iraqi Dinar currency, many Iraqi Dinar sellers and dealers are now offering to sell options, layaways, or reserves. What is an option/layaway/reserve?
Basically instead of buying the physical currency and receiving the physical currency, many Iraqi Dinar sellers are now offering you the ability to buy the "option" to purchase Iraqi Dinar within a time frame of say 30 days, 60 days, or 90 days.
How Does It Work? Different dealers have different programs, however basically here's what it is. Instead of paying $1,000 to buy a Million Iraqi Dinar upfront, you are paying a fraction of that price, say $300, for the option within the next 30, 60, 90 days.
Here's an example. You buy 10 Million Dinar on layaway. Typically this would cost you around $10,000, however on layway you can purchase the option to buy this 10 Million Dinar for the next 30 days for say $300. At the end of the 30 days you have two choices. First, you can excercise the option and pay $12,000 for the 10 Million Dinar. If you choose not to buy the Dinar your option expires and you get nothing and you forfeit your $300.
A couple things to note about options. Typically the option price is much higher than a normal buy price where as you could normally buy DInar for $1,000 per million, under an options contract the buy price is typically more like $1200 per million.
You're probably wondering, why in the world would anyone purchase an option? From what I can gather people buy an option for 30,60 or 90 days because they don't have the money to buy the Dinar upfront, or they feel they can leverage their money and buy more Dinar and they hope the Dinar will go up in value, they can buy at a later date, and pay for the currency with the increased value of the Dinar.
Problem with this logic is firstly, even if the Dinar goes up in value, you still have to have the cash in hand to buy that option, most dealer contracts do not allow you to use the increased value of the Dinar to pay for your purchase.
Another problem I see with options is nobody can ever time markets. A revalue of the Iraqi Dinar is not a certainty, if anything it's probably more unlikely than likely. Some people have been waiting nearly a decade for the Iraqi Dinar to increase in value. What are the odds you are going to guess the 30 day window that it could potentially happen in?
Lastly, and this is the scariest and most worrying part of buying options. When you purchase an option, the dealer or seller, selling you that option of 1, 5, 10 Million DInar should have that Dinar stashed away with your name on it incase you want to excercise your option and buy.
To further illustrate this point if a Dinar Dealer sells 100 Million DInar worth of options, they should have 100 Million Dinar sitting in a safe to cover those options. The problem is many dealers oversell options and don't actually have that DInar sitting in their inventory.
Here's where the problem comes in. If the Iraqi Dinar were to revalue tomorrow and you bought 10 Million Dinar options from a dealer and that dealer sold another 100 Million Dinar options, but only has 50 Million in their inventory a lot of people are going to be screwed over and told the dealer does not have enough to cover all the options. If you're lucky they may return your money but you are not getting Dinar.
This is my biggest issue with options. Along with all the other problems presented, your trusting and counting on a third party to hold your money for you. Personally I'd much rather be in charge of my own.
Though the details are cloudy it's already documented that a large Dinar dealer went out of business for this very reason, overselling options contracts. If you're thinking about buying options and ignore these warnings at the very least do your due diligence on who you're buying the options from. Also, it would be wise to ask the dealer if they can back all their options with physical currency and if so have they had an independent audit done to prove that?
Hope this hub provides some guidance for anyone considering buying an Iraqi Dinar option.