What are Your Options Regarding Forex Options Brokers?
Forex option brokers can generally be divided into two
separate categories: forex brokers who offer online forex option
trading platforms and forex brokers who only broker forex option
trading via telephone trades placed through a dealing/brokerage
desk. A few forex option brokers offer both online forex option
trading as well a dealing/brokerage desk for investors who prefer
to place orders through a live forex option broker.
The trading account minimums required by different forex
option brokers vary from a few thousand dollars to over fifty
thousand dollars. Also, forex option brokers may require
investors to trade forex options contracts having minimum
notional values (contract sizes) up to $500,000. Last, but not
least, certain types of forex option contracts can be entered
into and exited at any time while other types of forex option
contracts lock you in until expiration or settlement. Depending
on the type of forex option contract you enter into, you might
get stuck the wrong way with an option contract that you can not
trade out of. Before trading, investors should inquire with their
forex option brokers about initial trading account minimums,
required contract size minimums and contract liquidity.
There are a number of different forex option trading products
offered to investors by forex option brokers. We believe it is
extremely important for investors to understand the distinctly
different risk characteristics of each of the forex option
trading products mentioned below that are offered by firms that
broker forex options.
Plain Vanilla Forex Options Broker - Plain vanilla options
generally refer to standard put and call option contracts traded
through an exchange (however, in the case of forex option
trading, plain vanilla options would refer to the standard,
generic option contracts that are traded through an
over-the-counter (OTC) forex dealer or clearinghouse). In
simplest terms, vanilla forex options would be defined as the
buying or selling of a standard forex call option contract or
forex put option contract.
There are only a few forex option broker/dealers who offer
plain vanilla forex options online with real-time streaming
quotes 24 hours a day. Most forex option brokers and banks only
broker forex options via telephone. Vanilla forex options for
major currencies have good liquidity and you can easily enter the
market long or short, or exit the market any time day or
night.
Vanilla forex option contracts can be used in combination with
each other and/or with spot forex contracts to form a basic
strategy such as writing a covered call, or much more complex
forex trading strategies such as butterflies, strangles, ratio
spreads, synthetics, etc. Also, plain vanilla options are often
the basis of forex option trading strategies known as exotic
options.
Exotic Forex Options Broker - First, it is important to note
that there a couple of different forex definitions for "exotic"
and we don't want anyone getting confused. The first definition
of a forex "exotic" refers to any individual currency that is
less broadly traded than the major currencies. The second forex
definition for "exotic" is the one we refer to on this website -
a forex option contract (trading strategy) that is a derivative
of a standard vanilla forex option contract.
To understand what makes an exotic forex option "exotic," you
must first understand what makes a forex option "non-vanilla."
Plain vanilla forex options have a definitive expiration
structure, payout structure and payout amount. Exotic forex
option contracts may have a change in one or all of the above
features of a vanilla forex option. It is important to note that
exotic options, since they are often tailored to a specific's
investor's needs by an exotic forex options broker, are generally
not very liquid, if at all.
Exotic forex options are generally traded by commercial and
institutional investors rather than retail forex traders, so we
won't spend too much time covering exotic forex options brokers.
Examples of exotic forex options would include Asian options
(average price options or "APO's"), barrier options (payout
depends on whether or not the underlying reaches a certain price
level or not), baskets (payout depends on more than one currency
or a "basket" of currencies), binary options (the payout is
cash-or-nothing if underlying does not reach strike price),
lookback options (payout is based on maximum or minimum price
reached during life of the contract), compound options (options
on options with multiple strikes and exercise dates), spread
options, chooser options, packages and so on. Exotic options can
be tailored to a specific trader's needs, therefore, exotic
options contract types change and evolve over time to suit those
ever-changing needs.
Since exotic forex options contracts are usually specifically
tailored to an individual investor, most of the exotic options
business in transacted over the telephone through forex option
brokers. There are, however, a handful of forex option brokers
who offer "if touched" forex options or "single payment" forex
options contracts online whereby an investor can specify an
amount he or she is willing to risk in exchange for a specified
payout amount if the underlying price reaches a certain strike
price (price level). These transactions offered by legitimate
online forex brokers can be considered a type of "exotic" option.
However, we have noticed that the premiums charged for these
types of contracts can be higher than plain vanilla option
contracts with similar strike prices and you can not sell out of
the option position once you have purchased this type of option -
you can only attempt to offset the position with a separate risk
management strategy. As a trade-off for getting to choose the
dollar amount you want to risk and the payout you wish to
receive, you pay a premium and sacrifice liquidity. We would
encourage investors to compare premiums before investing in these
kinds of options and also make sure the brokerage firm is
reputable.
Again, it is fairly easy and liquid to enter into an exotic
forex option contract but it is important to note that depending
on the type of exotic option contract, there may be little to no
liquidity at all if you wanted to exit the position.
Firms Offering Forex Option "Betting" - A number of new firms
have popped up over the last year offering forex "betting."
Though some may be legitimate, a number of these firms are either
off-shore entities or located in some other remote location. We
generally do not consider these to be forex brokerage firms. Many
do not appear to be regulated by any government agency and we
strongly suggest investors perform due diligence before investing
with any forex betting firms. Invest at your own risk with these
firms.
Sri Lanka Rupee, Stocks Drop After Currency Trading Band Removed Bloomberg The central bank narrowed the currency's trading band against the dollar on Feb. 3 and Feb. 6 and today, prior to announcing its removal. The monetary authority raised benchmark interest rates for the first time since 2007 on Feb.
India Eases Currency Trading Limits for Some Banks Wall Street Journal By SUDEEP JAIN MUMBAI -- India's central bank has asked banks to approach it individually for relaxing some foreign currency trading limits and has already eased restrictions for some banks, a top official said Monday. "Some limits, based on their ...
iFOREX Adds Oil to its list of Tradable Commodities MarketWatch (press release) ROAD TOWN, Tortola, Feb 09, 2012 (BUSINESS WIRE) -- Leading currency trading company, iFOREX, has recently expanded its services, giving all Forex trading accounts direct access to oil CFDs. Targeting an audience that has little or no experience with ...
This January Azerbaijan's exchange currency trading totaled $82.5 million Azerbaijan Business Center Baku, Fineko/abc.az. The Baku Interbank Stock Exchange (BBVB) has renewed statistics of its operations. BBVB reports that in January 2012 the nine participating banks concluded 28 deals in 36 trading sessions in e-trading system (BEST).
FOCUS: Technology Buoys Retail Currency Trading, Reshapes Old Models Wall Street Journal By Eva Szalay Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Retail foreign-exchange trading is emerging as one of the biggest growth areas in the currencies space, and some of the trading firms that facilitate these flows are building up a whole new ...
Morgan Stanley Currency-Trading Head Stephen Mettler Leaves Bank BusinessWeek By Michael J. Moore Jan. 26 (Bloomberg) -- Stephen Mettler, who oversaw Morgan Stanley's interest rates and foreign-exchange trading businesses, has left the bank. Mettler, who joined the firm in 1997, retired, according to an internal memo obtained by ...
Bank of England and ECB Hold Steady, Indonesia Cuts CNBC.com [CNBC] ----------------------- MULTI CURRENCIES VS THE DOLLAR Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm. Learn more: The essential vocabulary for currency trading is on Key Currency ...
RELATED ARTICLESForex
Profits
The Forex Market-What, When and Why?Forex, FX and the Forex
market are some common abbreviations for the Foreign
Exchange market. Actually it is the largest financial
market in the world, where money is sold and bought freely.
The Basics of
Forex
Foreign exchange market is also known as Forex or FX
market. To date, it is the world's biggest "economic
bazaar".
The Secret of Reduced
Margin Spreads
One of the best kept secrets in trading is that of reduced
margin spreads. You cannot name a trading method that
provides more safety or a greater return on margin than
does a reduced margin spread, while also being one of the
least time- consuming ways to trade.
Options Trading -
Advantages and Disadvantages
What is Options Trading?An option is simply granting
someone the right to buy or sell something in the future.
In the case of Dow index futures options, when someone buys
a Dow call option they are buying the right to purchase
that underlying Dow future at a specific price, known as
the "strike price," at a future point in time, known as the
"expiration date.
Sending Signals for
Trading in Forex
Forex signals are sent by a forex firm to their subscribers
in order to buy and sell currencies. These signals are
called entry and exit signals for the forex dealers.
Crisis of Confidence in
the EU
The European Union (EU) constitution was dealt a double
blow, first by a French "no" vote on 29-May and then by a
follow on "no" from the Netherlands on 01-Jun. To add
insult to injury, one low level Italian diplomat quickly
called for a referendum in Italy to decide if a return to
the lira was warranted.
Forex Training: Follow
Your Gut or Your Broker
Which way will the forex market move? Do you just follow
your gut feeling? Or do you have Neo's sixth sense that
would let you be one with the market and feel the
underlying currents. Trading forex is a non stop action
movie but a good one, where you really don't know who will
win at the end.
Forex2u Forex Strategy
On Successful Forex Trading
The essence of the FX2u Forex strategy is that it does not
have any Forex trading system but could forecast the market
trend accurately. Every set of Forex trading system
available has its disadvantages.
Ways to Acquire
Discipline in Trading
One way to acquire discipline in trading..
Factors Influencing a
Currency Pair Exchange Rate
IntroductionThe exchange rate refers to the value of the US
dollar against the values of currencies of other countries.
Such a rate helps determine how much we pay for imported
goods and services and how much we receive for what we
export, among other things.
The Miracle of
Forex
My father, who owns a small parts store and garage for
vintage British sports cars, called me up recently and
droned on and on about how he is getting killed by the
Euro. Confused as to how the Euro could possibly be
affecting his small and seemingly insignificant business, I
asked him how.
Financial Crises, Global
Capital Flows and the International Financial
Architecture
The recent upheavals in the world financial markets were
quelled by the immediate intervention of both international
financial institutions such as the IMF and of domestic ones
in the developed countries, such as the Federal Reserve in
the USA. The danger seems to have passed, though recent
tremors in South Korea, Brazil and Taiwan do not augur
well.
Day Trading - Moving
Averages vs Support and Resistance
When day trading the SP and Nasdaq futures, do you rely on
your moving averages more than your support & resistant
areas?During the first hour of trading, the support and
resistance zones on the SP and Nasdaq futures are the most
important things to watch. The moving averages have not yet
had a chance to come into play.
Day Trading Training ...
You need more than just going to a free stock market
workshop to learn
Day trading is all about making buy and sell decisions.
When you make a trade either your going to lose money or
your going to make money, and some other times you will
break even.
Forex Trading
Systems
The foreign exchange currency market is the largest market
in the world because it trades up to $1.9 trillion daily.
Trading
Timeframes
Long term traders will work from end of day data
and look to hold trades for a few weeks up to many months.
Usually trend trading.
Creativity in
Trading
"Is it important to be creative in your trading?" I'm not
sure I can describe it in terms of importance. The creative
process is somewhat of a mystery, even to scientists who
study it.
Business and the
Forex
The business world is a complex web of supply and demand.
Money and goods, physical or otherwise, pass through the
global market every single day.
Why Forex Traders Plan To
Fail Before They Even Place Their First Trade & How You
Can Know It & ...
Have you heard the wise saying that a trader who fails to
plan, plans to fail? I have, and I was once that trader!
However, did you know that even though traders who have
constructed a plan, which incorporates their trading
strategy (their "edge"), they have a plan that is likely to
fail? If we look at all traders who participate in the
market: we have one group that fails to plan and therefore
plans to fail; another group whose plan is failed; and a
third group who properly plans and therefore does not
fail. Is it any wonder that the success rate for forex
traders is so slim? Well it doesn't have to be.
Facts of Day
Trading
Are you thinking of entering the fast-paced world of day
trading? Arm yourselves with the information from this fact
sheet on day trading.What is day trading?Day trading is an
investment tactic that does online daily stock trading with
a relatively short investment.
MORE RESOURCES updated Thu. February / 09 / 2012
