March 24, 2013
Forex options trading is one of the non-traditional investments available for your alternative investment strategies. Scroll down and click on the banners for the Wealth Club and find the best traders of managed forex accounts available. For those new to non-correlated investing in the forex options market, the first things you should understand is what Forex is and what trading options are. Forex stands for foreign exchange, and is a market open 24 hours a day during the business week. Also, rather than making money from stocks you are trading foreign currencies. The whole process of buying and selling Forex can be daunting, not to mention risky, to someone with little or no experience. It pays to educate yourself through books, newspapers and the Internet before venturing into currency options trading.
Options are heavily traded by large institutions, investment banks and hedge funds, however, they’re not widely understood among most retail investors. In Forex online option trading an option is sold by the writer of the option to the holder of the option. The contract between the two parties gives the option buyer the ability but not the requirement to buy or sell their holding at a price that is agreed upon in the contract. This is called the strike price. The contract is valid for a specific period of time or details an exercise date which is the particular date on which action may be taken. Basically, options are for speculation and reduction of risk depending on whether you are a managed forex accounts trader or only a hedger.
If you want to profit from options as an individual, there are a few different ways you can go about doing it. You can find a good mentor, get some training and develop the skills and proper mindset required to trade them on your own. Or, you can piggyback off the skills of a seasoned options trader who allows you to either manually copy their trades via a signal service, or auto-trade your account for you on your behalf. If you are a member of the Wealth Club, you can find these kinds of services and traders. Please scroll down to join our exclusive club.
In stock option trading, the option writer must provide shares if the actual price is more than the strike price. If the option writer thinks the stock will drop as compared to the strike price they will sell the option in order to make money. On the other hand, the buyer of the option thinks the price will go up over time (whether short or long term) which allows them to buy low and sell their holding, thus making money on the trade. Forex options trading is very similar to this, but has some differences too.
While there are two types of Forex options trading, the most common is call/put which is also seen in the stock market. Call means buy in trading language and put means sell. To call an option means you have the ability to buy when the price meets a specified price, and to put means you have the ability (but are not obligated) to sell when the price goes up to a specific level. The higher the rate climbs the more profitable a call gets. Since you are building upon a financial freedom foundation given to you through the Wealth Club, you want the maximum return for your money which means buy when prices are low and sell when they are high. Sounds easy enough, but for all traders both experienced and inexperienced Forex can be risky.