What is this OPTION?
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thread: What is this OPTION?

  1. #1

    What is this OPTION?

    More than FXCM's news, I kept hearing/reading OPTION, OPTION Expiring on Friday/Monday ... yada yada yada...

    What is that?

    From my initial expertise, it indies something like a bet wherein people place bets gaming a Pair will go up 200 pips or down 200 pips within 1 week... yada yada. . They win they loose, if that occur.

    Is this right?

  2. #2
    Junior Member javizmendi's Avatar
    25
    Just like in the stock market you've got options. You can trade options in the forex market(OTC). There are various usually people decide the volatility of a market working with an alternative. . A option can also be used to hedge risk or create egies where no matter where the market moves you make a profit. Options is a useful tool when used correctly

  3. #3
    like in the stock market you have options. It's possible to trade options in the Currency Market market(OTC). There are various usually people decide the volatility of a market working with an option. . An alternative may also be used to hedge risk or create egies where no matter in which the market moves you make a profit. Options is a useful tool when used properly
    Could you give an example?

    I still dont know what this option is...

  4. #4
    Junior Member calda's Avatar
    21
    Could you provide an example?

    I dont understand exactly what this alternative is...
    Unusual, but predictable, occasions often do happen before the expiration of alternatives. Follow the link. I would be delighted to answer any queries you may have.

    Http://www.investopedia.com/articles.../04/101304.asp

    finest.

  5. #5
    Junior Member oxiderark's Avatar
    11
    @:

    Take a look at the attachment below.

    Fast
    https://www.cliqforex.com/attachment...0780051350.pdf

  6. #6
    Could you give an example?

    I still dont know exactly what this alternative is...
    I haven't traded Options for years so the numbers that follow are only like and have no basis in fact.
    And they're loed in my experiance using Commodity Futures

    Trading Options is every bit as [ perhaps more] complied as Trading Forex and cannot be explained simply by an illuion.

    Essentially, Options have two agories.
    Puts Bearish in case you Buy, Bullish in case you Sell
    and
    Calls Bearish in case you Sell, Bullish if you Buy

    If you set a Choice in the Market Buy A Put, you've Sold @ a pre-determined Price The Strike
    Should you Call a Choice in the Market Buy A Call, you've Bought @ a pre-determined Price The Strike
    It could become quite complied out there as you've got the ability to Sell Puts or Calls too. Not to mention anything about NT, DNT etc.. . etc.. .

    Just how much you've got to Pay for this Option is going to be controlled by two Main Factors.
    A) How long before the Choice Expires. Time Factor
    b) How near the Current Market Price is to the Strike.



    Example.
    You believe the EuUS will reach 1.3200 and it will arrive by March '07

    You can...
    Buy 1 Total Lot Eur/USD @ 1.2800 and wait until Spring Next Year to Cash In.
    But what if you are Incorrect
    Downside: Paid Margin from Account and it's going against you even farther to the point that the Account is now down $2,000.00. MM Apart from today

    Choice
    Hey you know what, I THINK the EuUS will reach 1.3200 But I'm not Sure.
    I would like the Choice to become Extended the EuUS in case it get's close to there BUT I don't wish to Risk my Entire Account to achieve that.
    Then you can...
    Buy a March 07 Call. Strike 1.3200 and pay $300.00 for the OPTION to be long.
    Downside: Maximum $300.00 Loss. The Cost of this Choice. In the event the price Never gets close to 1.3200, the "Choice will Expire Worthless. </b>

    Upside: Should EuUS get's to 1.3200 BEFORE your Choice EXPIRES next March you've got some Choices.
    1) Sell your Choice Back to the Market for more than the $300.00you paid for this. This really is the most common choice.
    Recall that the Closer you get to Expiry, the Time Factor will start to Erode the worth of your Choice as it currently has less Time for to the Strike.

    2) If the Price goes through 1.3200 and reaches 1.3400 it is possible to Excercise your Choice to Buy @ 1.3200 and efficiently be Extended EuUS from 1.3200.

    I hope that this not only provides you an idea how complex options can be Why the news that Major Players are defending a 1.2800 1.2900 DNT Double No Touch Choice may be significant to you.

    Whew...

  7. #7
    Junior Member calda's Avatar
    21
    , my buddy, you are one post shy away from reaching 1000. What are you waiting for? Post another one !

  8. #8
    , my buddy, you are one post shy away from hitting 1000. What are you waiting for? Post another one !
    Honestly I never noticed.
    I figure my 1,000th post was to Phil in the Members Lounge re his Workstation.


    WooHoo A Post Millennia :surprised

  9. #9
    Option
    Hey you know what, I THINK the EuUS will reach 1.3200 But I'm not Sure.
    I would enjoy the Option to be Extended the EuUS if it get's near there BUT I don't want to Risk my Entire Account to do so.
    Then you can...
    Buy a March 07 Call. Strike 1.3200 and pay $300.00 for the OPTION to be long.
    Downside: Maximum $300.00 Loss. The Cost of this Option. If the price Never gets near 1.3200, the "Option will Expire Worthless. </b>

    Upside: If EuUS get's to 1.3200 BEFORE your Option EXPIRES next March you have some Alternatives.
    1) Sell your Option Back to the Market for over the $300.00you paid for this. This really is the option.
    Recall that the Closer you get to Expiry, the Time Factor Will Begin to Erode the Value of your Option as it now has Less Time for to the Strike.

    2) If the Price goes via 1.3200 and reaches 1.3400 you can Excercise your Option to Buy @ 1.3200 and efficiently be Extended EuUS from 1.3200.
    I visit. So this specific option scenario you just described is more like:
    paying a commission in exchange for the right to buy a currency in the strike price regardless when the price is higher... Of course I am not oblidged to buy if the price never get the strike price... Is this right?

    If so, can I capitalize on this option as part of a hedge egy?

    I move long GBPJPY (because of its interest) @ 221.40
    Assuming my account can only withstand 500 pips of reversal, I buy an option for a GBPJPY not going lower han 217.00 pips over 1 year.
    If GBPJPY go lower than 217.00, I will sell GBPJPY in 221.40 into the option house.

    Of course, if the price never rolls 217.00 within 1 year, then I lost the option fee.

    Is this right?

  10. #10
    I see. So this specific alternative scenario you described is much more like:
    paying a fee in exchange for the right to buy a currency at the strike price regardless if the price is higher... Of course I am not oblidged to buy should the price not touch the strike price... Is this correct?

    If so, can I capitalize on this alternative as part of a hedge egy?

    I move long GBPJPY (because of its sake) @ 221.40
    Assuming my account can only defy 500 pips of reversal, I buy an alternative for a GBPJPY not going lower han 217.00 pips within 1 year.
    If GBPJPY go lower than 217.00, I will sell GBPJPY in 221.40 into the alternative house.

    Of course, whenever the price never touches 217.00 within 1 year, I lost the alternative fee.

    Is this correct?
    Close.
    I move long GBPJPY (because of its sake) @ 221.40
    Assuming my account can only withstand 500 pips of reversal, I buy a 217.00 PUT Option to get a GBPJPY.
    If GBPJPY go lower than 217.00, my Put Option will have gained in Value offsetting some of my Spot Long Losses.

    *Notice* Rather than
    Buy a 217.00 Put Option, you can alternatively
    Sell a 225.00 Call Option.

    Though they Sound similar, The Premium cost of insurance is going to be different.

    Options are a Really common way of Hedging in Futures.

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