Have You Ever Traded Forex Options?

Have You Ever Traded Forex Options?

Have You Ever Traded Forex Options?

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Written by Hass67

Tuesday, 07 April 2009 13:13

Have you heard about George Soros; The legendary manager of Quantum Hedge Fund who had made a cool $1 Billion profit from a single bet. In the early 1990s, one day he was sitting in his office discussing currency markets with his associate. Both of them were of the opinion that the British pound was overpriced and Bank of England could not sustain its price for long.

by Hass67

Have you heard about George Soros; The legendary manager of Quantum Hedge Fund who had made a cool $1 Billion profit from a single bet. In the early 1990s, one day he was sitting in his office discussing currency markets with his associate. Both of them were of the opinion that the British pound was overpriced and Bank of England could not sustain its price for long.

He decided to purchase $10 Billion of puts and calls options by using all their funds assets as collateral. George Soros was willing to gamble everything on a single bet.

He was convinced that the Bank of England cannot sustain the overpriced British pound. In a short time, other speculators also joined action. There was a huge selling pressure on British pound. In a matter of just 24 hours, Bank of England had to take British pound out of the European Monetary System and let it float freely.

The value of British pound plunged. George Soros gamble paid off. He is now famously called the Man who broke the Bank of England.

Currency markets are huge. Everyday roughly $3 trillion gets transacted in the forex markets. There are many methods, the traders can use for profiting from the volatility in the currency markets.

Spot, futures and options are three contracts that are traded on centralized exchanges and available to you as a retail forex trader. Swaps and Forwards are two more contracts traded in forex markets for hedging by large institutions like big banks, multinational corporations and off course hedge funds.

Lets discuss trading forex options. Options are derivative products that give you the right to buy or cell or certain underlying asset at a predetermined price known as a strike price before or on a certain date known as the exercise date.

In case of a forex options the underlying asset is the currency. Now, forex options give you the right to purchase/sell a certain amount of a particular currency on payment of a premium.

When will you profit from purchasing a forex options? If the market price of the currency is above/below your strike price, you can buy/sell that currency by exercising your option of buying/selling the currency at the strike price and make a decent profit.

If the currency market price is below/above the strike price of the forex options contract that you had purchased by paying a small premium; you can simply let the options contract expire. You only lose the premium.

There is a very good forex options strategy that lets you profit from the currency markets in whatever direction it is moving. You can profit regardless of the direction of the market.

This is a risk free method but it only guarantees 30-50% ROI. If you are satisfied with this much sure shot return you can try this method.

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in online trading especially options and forex trading. Read more about Forex Options Non Direction Trading System. Discover a revolutionary new Forex Robot

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