Most traders recognize options as derivative instruments used in the stock market. Few beginner forex traders realize that you can also use options in the currency markets. The purpose of an option is to give traders opportunities to increase their profits while limiting their risk.
Like I mentioned before, utilizing options allows you to limit your downside risk. Your downside risk is limited to the amount you paid for the option. Your profit potential is unlimited, and you don’t have to risk much capital. So using options will enable you to pay less money upfront for a spot forex position.
There are two types of forex options: SPOT (single payment option trading) and call/put. If you’ve traded options in the stock market, the call/put options operate in the same way. The SPOT option is more flexibile than a call/put option. External Resources:
Forex Option Trading Guide
Forex Trading Resource
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