Forex option brokers can generally be divided into two separate categories: forex brokers that offer online forex option trading platforms and forex brokers who only broker forex option trading telephone trade posted via a treatment/brokerage desk. A few forex option brokers offer both option of the online forex trading also a treatment/brokerage desk for investors who want to orders via a live forex option broker.
The trading account minimums prescribes different forex option brokers vary from a few thousand dollars to over fifty thousand dollars. Forex option brokers can also investors to trade forex options contracts with notional minimum values (contract sizes) up to $ 500,000. Last, but not least, certain types of forex option contracts can be entered 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 that concern you, can you the wrong way with an option contract you don't of home Exchange can stuck. Before trading, investors should examine 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 that are offered to investors by forex option brokers. We believe that it is extremely important for investors to understand the very different risk characteristics of each of the option of the forex trading products that are offered by companies 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, General option contracts that are traded through an over-the-counter (OTC) forex dealer or clearinghouse). In the simplest terms, vanilla forex options would be defined as the purchase or sale of a standard forex call option contract or forex put option contract.
There are only a few forex option broker/dealers who just 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 the telephone. Vanilla forex options for major currencies have good liquidity and you can easily market long or short to enter or exit from the market any time day or night.
Vanilla forex option contracts can be used in combination with each other and/or spot forex contracts are a basic strategy such as writing a covered call or much more complex forex trading strategies, such as butterflies, strangles, ratio spreads, synthetic materials, etc. Also just plain vanilla options are often the basis of forex option trading strategies known as exotic options.
Exotic Forex options Broker-first, it's important to note that there are a few 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 are generally less than the most important currency is traded. The second forex definition for "exotic" is used on this website-a forex option contract (trading strategy) that is a derivative of a standard vanilla forex option contract we refer to.
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 final due date structure, payout structure and payout amount. Exotic forex option contracts may need a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, because they often are tuned to a specific investor needs by an exotic forex options broker, are generally not very liquid, if at all.
Exotic forex options traded in General 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 be Asian options (average price options or "APO"), barrier options (payout depends on whether or not the underlying price reaches a certain level or not), baskets (payout depends on more than one currency or a "basket" of currencies), binary options (cash-or-nothing if underlying strike price does not reach the payout), Asian options (payout is based on the maximum or minimum price reached during the term of the agreement), 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 the needs of a specific dealer, therefore, exotic options contract modification types and evolve over time to the ever-changing needs.
Since exotic forex options contracts mostly on tailored to individual investor, most of the exotic options business in transacted over the telephone through forex option brokers. However, there are a handful of forex option brokers who offer "if touched" forex options or "single payment" forex options contracts online whereby an investor an amount that he or she is willing to risk in exchange for a specified payout amount is the price of the underlying asset a certain strike price (price level). These transactions offered by legitimate online forex brokers can be regarded as a kind of "exotic" option. However, We have noticed that the premiums will be charged for these types of contracts higher than just plain vanilla option strike prices with similar contracts and you're not from the option position can sell once you have purchased this type of option-you can only try to compensate 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 that you would like to receive, you can pay a premium and sacrifice liquidity. We encourage investors to compare premiums before investing in this kind of option and also check that the brokerage firm is reputable.
Again, it's pretty easy and liquid to go an options contract exotic forex, 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.
Companies by offering Forex option ' Betting '-a number of new companies have popped up in the past year offering forex "betting." Although some legitimate are can, some of these companies are both entities off-shore or in another external location. We find this forex brokerage companies in general do not. Many do not seem to be regulated by a government agency and we suggest investors perform due diligence before investing with a forex companies betting. With these companies invest at your own risk.
