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Currency Option Trading

Updated on March 17, 2010

There are many ways to trade on the currency market. You can do Forex which is 24 hour, spot trading where you buy the currency at a certain point, and sell it at an other point you choose. You can also do currency futures trading where you make a contract to buy at a certain price and to sell at a certain price. Each of those has its own advantages and disadvantages.

A third type of trading is currency options trading. This type of trading differs from the other two mentioned above. It is where you will buy and sell the rights to buy and sell a fixed and specific amount of currency during a chosen time frame. Sound confusing? It can be confusing initially, but once you understand the potential, you'll see that option trading may definitely be what you want to do.

So What Is Currency Options Trading?

When trading currency options, you're essentially agreeing to sell a certain currency at any point during a given time frame.  Essentially, you are betting that the currency's value will increase in that time frame, and so you will be able to sell the currency and make a nice profit on i.

By predicting what will happen in advance (or trying to at least) you set in stone when you think will be the best time frame to sell the currency for the best price.  There are some terms and concepts when you trade currency options, and i am going to teach you what they mean.  Remember, you aren't necessarily buying the currency, you're buying the option to sell and buy the currency, which is definitely different.

Currency Trading Options Terms You Should Know

The two most important terms when it comes to currency options is the "put option" as well as the "call option".  The call option is when you you can buy the shares any time, and the put option is for selling the share.  So, if you think one currency will overtake another currency, then you'll buy a call for that currency combination.  Then, if your predictions are right when the market closes, then you will make the profits from it.  Those profits will go directly to you.

Currency Options Trading is Not a Guessing Game

With all of the money involved, and the possibilities to make even more money, it can be tempting to want to jump into currency option trading and try your hand it.  But, it doesn't work like that, and the people who do that will end up losing money, and often fairly quickly.  While luck can play a role, it definitely should not be relied upon for earning big money.

You need to study the markets, and we aware of news that may affect the markets.  Don't speculate on what will do will, study and see what has the best chances of doing well for you, and that will be the way to make some real money from trading currency options.

Binary Options for Currency Trading

A recent option that was made available to the United States public was the Binary option in currency trading.  They will give you a guaranteed profit among if the options expire in the money.  You'll now know what you will either gain or lose before you even make the investment.

It doesn't really matter how much of a change or fluctuation these is, because as long as there is a gain when you think there will be a gain or a loss when you think there will be a loss, then you will profit.

All you need to figure out is which way a currency is going in a certain time frame, be it the next hour, the next day, the next week, or the next month.  You definitely have the option to earn a nice profit, but there is always a risk.

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    • drmingle profile image

      drmingle 

      8 years ago from United States

      Brilliant great write up. I am marking this one awesome. Keep up the good job and thanks for contributing your hub.

      It’s always good to read a well written post.

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