Tag Archives: FX options

FX Options Trading Strategies

1Steadyoptions Strategy Volatility Trading  are similar to equity options strategies. The major difference is that the underlying for FX is a currency pair and with equity options the underlying is stock. With equity options, the underlying can attract dividends and is subject to corporate actions which can affect its price. With FX options, the underlying isn’t subject to anything corporate although it is subject to each pairs national economy as well as the global economy.

Best options trading platform

Best options trading platform are vastly used by banks and institutions for FX hedging. Loosely, around 75% of all FX Options transactions are executed by banks and agencies on behalf of large corporations to protect against any adverse movement in currency prices that may impact on the profitability of a company’s international trade.

A major draw card for traders who want to employ FX options trading strategies into the market is that FX options aren’t standardised. What I mean by that is equity options expire on the 3rd Friday of every month whereas FX options expire at the end of the trading day in New York. Traders can choose their expiry day from one day to any day up to and including 12 months from the day the FX options trade is placed.

FX options

Another major draw card of FX options is the ability to move the strike price to be At The Money (ATM), In The Money (ITM) or Out of The Money (OTM) when you place the trade. Each increment is only five pips. With equity options, strike prices are differences based on the value of the stock and the increments are tighter the nearer the value of the stock is to zero and spread further the farther the stock is away from zero.

The combination of flexible expiry dates and strike prices make trading multi-leg strategies attractive because traders can reap the full reward of what multi-leg strategies are traded for. Traders don’t necessarily have to wait for the price of the underlying to get the and ATM position as traders can move the strike price to be within five pips, if not ATM at their discretion.

Calendar call option spread are very useful, and traders should look to a provider that offers a wide range of currency pairs to enable them to employ them into the market.