| Think About Trading Forex Options |
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| Written by Hass 67 |
| Tuesday, 14 April 2009 15:56 |
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Remember George Soros; the one who had broken the British pound and brought the Bank of England to its knees in the early 90s. George Soros made cool $1 Billion profit in a matter of few days by betting on the fact that the British pound was overvalued and Bank of England could not sustain its price for long.
Remember George Soros; the one who had broken the British pound and brought the Bank of England to its knees in the early 90s. George Soros made cool $1 Billion profit in a matter of few days by betting on the fact that the British pound was overvalued 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. His knowledge of the currency markets was perfect. He was sure that his conviction that the Bank of England cannot sustain the overpriced British pound would come off right. Soon other currency speculators also joined. A huge selling pressure on British pound developed. Bank of England could not sustain the selling pressure too long and in a matter of 24 hours had to take British pound out of the European Monetary System and let it float freely. The price of British pound plummeted. George Soros gamble had worked. The next day, his picture was in almost all the major newspaper with the caption: The Man who broke the Bank of England. Forex markets are huge. There are many ways to profit from the volatility in the forex markets. A number of trading vehicles are available for you to try in the forex 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. Options are derivative contracts that let you buy or sell an underlying asset at a price called exercise price before a certain date known as the strike date. Unlike futures, you dont have the obligation to actually buy/sell the currency. Currency is the underlying asset in forex options. You can purchase a forex options on payment of a certain premium. This is the price that you pay for getting the right but not the obligation to buy/sell a certain currency. You may or may not exercise your right to buy/sell the currency. If the market price of the currency is above/below your strike price, you can buy/sell that currency by exercising your option. However, in case, the currency market price is below/above the strike price of the forex options; you need not exercise your right to buy/sell. By not exercising the forex options contract, 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. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in stocks, options and forex trading. Read more about Forex Options Non Direction Trading System. Discover a revolutionary new Forex Robot |