FACT: 95% of forex trader do not know what is forex options, 4% of forex trader know what is forex options but they think that forex options was too complicated for them and only 1% use forex options for trading.

Why Forex Options? Options allow you to have the right but no obligation to either buy a call option or sell a put option which is an asset at the certain price as known as the strike price on the certain date too. Right in buying or selling the underlying asset, you will pay a premium upfront to the seller of the options, whether you choose to use it or exercise the right. It is all dependent upon the market movement at the time the options exipres.

I will show you What is Forex Options in 7 Easy steps….

What is a Call Options?

Call Option give the options holder, in return for paying a premium, the right but not the obligation to buy the underlying asset at a specified price within a specifie timeframe.

What is a Put Options?

Put Option give the option holder, in return for paying a premium, the right but not the obligation to sell the underlying asset at a specified price within a specific timeframe.

What is a Strike Price?

Strike price is prices at which an options holder cab buy or sell underlying instrument. Strike price are also called the exercise price.

What is a Value Date?

Value date is the date when the settlement of funds for a trade transaction will take place on your account. In Forex, the value is usually two banking days from when the trade is executed.

What is an Exercise Date?

You will exercise an option when you invoke the right to purchase or sell the underlying asset at the price stated in the option contract.

What is an Expiration Date?

The expiration date is the day which the option expires. Options that can only be exercised on the expiration date are called European options.

What is Forex Vanilla Option?

Forex Vanilla Option is an ordinary option with no special features unlike stock or future options.

As a Forex Options Trader myself, it is easy to take the advantage on the forex market. Even if the market move up or down, you will be able to profit from that. Different strategy will get different amount of premium.

As a saying…

Past different from present, present different from future.

Market undergoing change.

Profitable strategies become detrimental.

But Forex Option Trading always stay.



By: Timothy Stevens

About the Author:

Options Trading has a reputation for being extremely risky, but this reputation is in large part undeserved. True, option trades are extremely risky - even dangerous if you have no idea what you are doing. However, that is true of all forms of offline or online trading, and trading in options is no exception.

While options trading has this reputation among laymen, it is often considered to be a form of risk limitation with professional traders. After all, in what other form of investment can you guarantee the maximum loss you can suffer right at the point where you enter the trade?

Options are contracts that give the purchaser the right to buy or sell an underlying security, such as a stock, a bond or a commodity, at a fixed price and for a fixed time period only. You can find options on underlying securities such as stocks, mutual funds, bonds, commodities, and more.

Option trading gives you the chance to exploit a whole range of market opportunities that are unavailable with conventional online stock or forex trading. For example, one class of option trade allows you as the buyer to make money if you expect the market to move strongly in one direction or the other, but you are not sure in which. If you are the seller of position, by contrast, you are betting that the market either goes nowhere directionally and/or the volatility declines.

Trading in options can actually lower your risk. For example, whenever you buy an underlying stock, there is always the extremely small, but non-zero, risk that the company can go bust and the stock price can first be suspended and then go to zero. That means that your potential loss is the point difference between the price you entered the stock trade and zero, multiplied by the number of shares you own! If you had done the corresponding option trade by contrast, i.e. buying call options on the stock, your loss would be simply the price you paid for the options.

Where options are very risky is where untrained traders go “naked short”, as it is called. In one common example, they sell put options on a stock index future and collect the option premium as payment. This gives the buyer the right to sell the stock index future back to the put option seller at a fixed price, called the strike price. This is fine as long as the underlying index continues to rally and the strike price is basically never reached. However, in one famous example, one hapless option punter, who had been happily selling put options on the FTSE index futures for years and collecting the cash, got badly caught when the entire stock market crashed in 1987, and the option buyers exercised their right to sell their positions at prices much higher than the current market!

However, such foolishness apart, option trading can be an extremely profitable way to trade in stocks, forex, bonds, currencies or whatever. When used properly, they can actually limit your risk drastically. Option trading can allow you to create positions and exploit market opportunities not otherwise available. Best of all, if you combine options with the underlying instrument, you get to create a whole range of interesting risk profiles.

The key to success in option trading is, as with anything else in life, to study the subject hard before trying to trade and, if possible, begin by paper trading the market. Once you are satisfied that you know what you are doing and have a valid option trading methodology, then you can begin risking real money. Even then, you only trade very small to start with and with money that you can afford to lose. Once you know what you are doing, and your account size show some nice profits, then you can afford to trade progressively larger size for progressively larger profit.



By: Asoka Selvarajah

About the Author:

Believe it or not, good Options trading newsletters and Stock trading newsletter have helped people make a lot of money from the stocks and options markets while saving them considerable fortunes by trading on their own.

The best trading newsletters encompass all the fundamentals of great trading in their service that in turn helps you form top-notch trading habits. Besides making money, forming great trading habits taught by professional trading newsletters (and not all newsletters are taught by professional traders) can be one of the most valuable things you pick up from your subscriptions.

And just for the record stock trading newsletters or option trading newsletters are also called stock trading advisories or option trading advisories, or stock pick newsletters, option pick newsletters, stock trading membership site or option trading membership site etc. you get the picture.

The question is, “How do you find a good Options trading newsletter or Stock trading newsletter?”

Well first all, what kind of trading style do you want to trade? Here are the varieties that are available:

- Swing trading stocks and options

- Intraday trading stocks

- Pivot point position trading on stocks and options that aim for explosive five day to one month moves with well-defined stop losses

- Trend trading that takes advantage of two to four week trends and three to six month trends - trading stocks and trading options

- Then you have the various options strategies, complex option combinations, credit spreads, covered calls etc.

The best services first focus on stock price movement. These top-performing services combine technical analysis, chart pattern set ups, anticipation of opportunities on the charts in addition to combining other price motivational factors such as earnings season cycles, stocks splits, seasonal runs, trends of the indices etc.

The best services have a decent track record. That said don’t get too caught up in a track record because some services may fake their track record. Bottom-line is that the philosophy of the service must make sense and must meet common sense. In other words their approach to capturing trading profits must make sense. Ultimately, if you like what you see, the best test will be to take a trial and paper trade their service. Don’t use real money but pretend like you’re trading in real time with real money.

When you’re testing a stock trading newsletter or option trading newsletter make sure you give it a fair shot. Remember, once you find a good service that service could make you a lot of money. In fact, through known acquaintances that wish to remain anonymous, some subscribers to certain newsletters say they have made millions of dollars trading stocks and options through those particular newsletter trading ideas. So keep positive about the potential of some of these trading newsletters. There are actually good newsletters out there.

Really, the key to finding your Stock trading or option trading newsletter ‘golden goose’ that lays the ‘golden eggs’, is to search in the search engines, search through blogs, forums and review sites. Often when you read review, that person may be a little biased because they may be promoting a particular newsletters affiliate program but it’s worth checking out. Additionally there are many advisories listed in trader magazines you’ll find in your local bookstore.

The bottom line is that you see something that looks interesting you must give it a shot. Don’t trip over pennies on your way to thousands of dollars. If something looks good sign up, receive their updates and paper trade. This way we’ll be doing complete research and you won’t leave behind something that could have even provided you financial freedom.

Paper trading, which is pretending that you are really trading but without the use of real money, is definitely the best way to get started with any trading service, especially if it is in active trading service. Using real money can cloud your judgment because real money pulls strong emotions into your evaluations.

Start doing your research for your ‘golden goose’ stock trading newsletter or options trading newsletter today. Imagine the possibilities if you find one!



By: Chris Viscaya

About the Author:

Professional traders use the term “lean” to refer to one’s perception about the directional strength of the stock. When you own a stock and intend to hold it for a period of time, you are aware that you will probably be holding it while it goes up and while it goes down.

This means that at any given moment in time, you might have a different opinion of the potential movement of that stock. Knowing this, there is a way to address your present level of confidence or “lean.” You do this by your choice of which option you sell.

While it is true that the at-the-money option has the most amount of extrinsic value, it might not always be the ideal option to sell in every situation.

For instance, if you feel that the stock itself has a very high chance of producing capital appreciation above the potential amount of premium you could receive from selling an at-the-money call, then sell an out-of-the-money-call so you can allow yourself a little more room to the upside on the stock.

For example, let’s say the stock is trading at $27.00. Normally, you would sell the 27.5 calls at say $1.00. If the stock were to rise quickly and eclipse the $28.50 mark, then with the buy-write strategy, your position would have maxed out at $28.50, and you would have a $1.50 one month gain. Not bad, but if the stock went to $29.50 then you would have missed out on another $1.00 profit. However, if we had sold the 30 calls for $.30 then we would have another outcome. You bought the stock at $27.00 and sold the 30 calls for $.30 and the stock goes to $29.50.

You would have made $2.50 in capital appreciation and $.30 in option premium for a total of a $2.80 return.

So, if you feel the stock has a real good shot at taking a run up, you can lean your position long by selling an out-of-the-money call.

If you have a more neutral view on your stock you would sell an at-the-money-call in order to receive a bigger premium which allows for greater downside protection if the stock trades down and higher potential profit if the stock becomes stagnant.

This strategy also works on the downside. If, by chance, you feel that the stock may trade down a bit during the life of the option, then you can sell an in-the-money-call. The effect of this would be to provide you with a little extra premium to cover more downside risk.

Remember when you sell an option you seek to capture extrinsic value. An in-the-money option not only has extrinsic value but also some intrinsic value.

When you feel that you want to lean your covered call strategy (buy-write) a little short, choose to sell an in-the-money call so you can also have some intrinsic value to cover your downside.

As an example, say your stock is trading at $29.00 and you feel that your stock may trade down a little but still remain in an uptrend cycle. You don’t want to get rid of the stock but you also don’t want to lose any money so you sell the 27.5 call at $2.00.

The stock starts to trade down and finishes at $26.00. If you had owned the stock naked, then you would have lost three dollars since you owned the stock at $29.00 and it closed at $26.00 on expiration.

However, because you sold the 27.5 calls at $2.00, you would only realize a $1.00 loss in the stock. The premium received will offset the loss due to the fact that you identified and adjusted for a likely move.

As you can see, the buy-write strategy can be altered to fit any directional view you have on your selected stock.

Finally, if you intend to use the buy-write strategy successfully, you generally need to sell the calls against your stock on a consistent, recurring interval, over a period of time.

This means that you will have to be prepared to “roll” your calls out to the next month come expiration. Sometimes, all you’ll need to do is to sell the next month out call.



By: Brett Fogle

About the Author:

Let’s face it, derivative trading is risky. Period.

Derivatives such as futures and options are leverage instruments and by virtue of being leverage instruments, derivatives inherently carry more risk and exposure than pure and simple stock trading. Leverage instruments are risky because leverage allows you to do more with the same amount of money than you would normally be able to. Yes, leverage instruments such as futures and options have the potential to generate over 10 times more profit on the same move on the price of a stock than just buying the stock itself.

What most beginners to derivatives trading do not take into consideration is the fact that leverage is a double edged sword. Just as it could help you generate over 10 times more profits on the same move, it could also incur as much losses should the stock move against your favor. This is also why many beginners to futures or options trading lose their shirts so quickly and go broke.

So, why is futures and options trading still so popular then?

Very simply, most beginners with only a small fund and wants to build up a significant fund quickly could not depend on simple stock trading for a start. They need more leverage and they can afford to take more risk since the amount at stake is usually pretty small. With this in mind, the only question that remains is, which is safer for beginners? Futures or Options?

To determine which is riskier, we need to ascertain certain the qualities that constitutes “Risk”. For derivative instruments, the main qualities that constitute trading risk are: Leverage, Liability, Liquidity and Versatility (fulfillment obligation is usually not a concern in trading as traders rarely hold till expiration).

Liquidity in the stock futures and stock options market is definitely lower than the stocks themselves but is enough for the trading purpose of retail beginners and shall be excluded in this discussion.

Leverage

Leverage of futures and options is the multiplication effect on your money versus buying the underlying stock itself. We shall not go into detailed discussion on how leverage is being calculated for futures and options here. It suffices to know that the higher the leverage, the higher your potential profits and losses becomes. Leverage in futures is a lot higher than the leverage in stock options due to the much higher lot size and low margin requirement. This makes futures trading riskier than options trading in terms of potential losses due to leverage.

Find out how leverage is calculated in options trading at http://www.optiontradingpedia.com/options_leverage.htm .

Liability

Liability here means the maximum amount of loss you bear when things go wrong. Yes, we all make wrong investment decisions all the time and derivative trading is no exception. When you buy stock options, the maximum loss you can sustain is the amount of money you used in purchasing those stock options. When things go wrong, those stock options become worthless and you can lose no more than that. However, in futures trading, you are exposed to unlimited liability and will be made to top up your trading account with the daily loss amount in what is called a “Margin Call”. As long as your position continues to go south, you continue to top up your losses until you go broke or the stock gets to the bottom. Either way, you could have lost all your fortune in one go. That risk along with the fact that you have higher leverage in futures trading makes futures trading a lot riskier than options trading.

Versatility

Versatility here refers to the ability to profit in more than one direction. Logic says that if you can profit in more than one direction, risk is much lower than when you can only profit in one direction, right? Yes, stock options trading is highly versatile as there are options strategies that can be created to profit from 2 or more directions! Futures trading is basically single directional. You are either the short or the long. Never both, unless used in combination with the underlying stock, which increases capital requirement and defeats the purpose of leverage.

Get a full list of Options Strategies at http://www.optiontradingpedia.com/options_strategy_library.htm .

In conclusion, futures trading is riskier than options trading for the retail beginner to derivatives trading because of higher leverage, unlimited liability and lower versatility. This is also why options trading is slowly taking over as the derivative instrument of choice for the beginner derivatives trader. To learn all about options trading, please visit http://www.optiontradingpedia.com .



By: Jason Ng

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