The large selection of trading tools offered by brokers to their clients often baffles not only beginners, but also experienced traders. What to choose, in which direction it is better to work and where to invest money in order to get the maximum profit with the minimum risk of losing your savings? These questions are of interest to all participants in online trading, regardless of their experience, the amount of deposits and the chosen trading tools for working in financial markets. In this review, we will look at what forex options are, what is the difference between them and classic binary options, and why this tool is popular with experienced traders.
What is forex options: a general definition and basic principles of application of this trading tool
Experienced experts of the global financial market claim that binary options are actively used by “bookmakers” and other dubious “participants” of online trading. Indeed, the simple principle of this procedure attracted the attention of users who have never heard of such terms as "Forex", "trading", "spread", etc. People gladly trusted money to adventurers (and continue to do so), considering binary options, a bit of a casino.
Why does this review start with a description of the above scams? Everything is very simple. If you decide to engage in online trading, but have not learned to distinguish a real broker from “bookmakers”, “kitchens”, etc., then it’s better to get engaged in something else, don’t give presents to similar scammers.
What should a trader know about forex options before starting using this financial instrument?
If the profitability of classical binary options is fixed, then the deals in question can bring the trader unlimited profit. In this case, the possible loss of the user is limited to the amount with which he invested in this transaction. Very often, these operations are used by importers and exporters of products to hedge risks associated with a change in the exchange rate in an undesirable direction.
When concluding a contract for the purchase / sale of an asset at an agreed price, in addition to a fixed price, it is necessary to consider the following parameters:
• Type of option.
• Currency pairs for this transaction.
• The size of the award.
• Date of option exercise.
According to the international classification, there are two types of trading instruments considered:
• European.
• American.
In the first case, the option is allowed to be exercised after the date specified in the contract, in the second - only in the period between the commencement of the transaction and its termination.
Analyzing forex options, which offer the most famous brokers in this field, focusing on the available trading operations on open positions, an inexperienced user will not immediately remember all the available options. You can buy and sell the options presented, subject to the fulfillment of a variety of factors. But it is best to study this issue in more detail directly on your broker's web resource. This is due to the fact that the presented figures may vary significantly in different companies. Today, one of the most popular broker for trading this type of options is the IQ Option trading platform.
At the conclusion of the transaction, the main task of the trader is to choose the right strike price and the amount of funds that he is willing to invest in this operation. Experienced experts recommend using no more than 3-5% of the total amount of funds in the trader's account. With regard to determining the price, in this case, apply three types of analysis:
• Visual. Uses a schedule of changes in the value of assets.
• Technical. It is assumed that all factors are included in the above graphs.
• Fundamental. Considers all the important political and economic events that may affect changes in the value of a currency.
The trader makes a profit if his prediction is fulfilled, as is the case with the classic binary options. But its size depends on how many points the real value of the asset has risen / dropped from the strike price set at the time of the transaction.
The complexity of these contracts lies in the large choice of factors that may affect the size of the trader’s income. At the same time, the user must remember that the spread amount is also included in the general financial expenses or this issue is discussed separately during the transaction. The amount of deductions to the broker depends on your rate and the time for the option to be exercised.
General Conditions for Currency Options Brokers
Consider the basic rules that global financial market participants adhere to, offering fx options to their clients.
• For the convenience of clients, the companies calculate the amount of the spread themselves, including all the nuances of the upcoming transaction.
• As a rule, traders offer a large selection of assets and trading solutions. The latter provide an opportunity to hedge risks and find the optimal ratio between possible losses and incomes.
• Marketplaces provide access to users of mobile devices, while ensuring the security of personal information and financial security.
• You can contact professional support specialists at any time to help solve your problems.
• When working with forex options, traders always get access to alternative risk management options offered by this broker.
• The maturity of the contracts in question is usually in the range from one day to 12 months.
• In addition to economic / political news or other analytical information that may affect the exchange rate, many companies provide an opportunity to get advice from professionals involved in these issues.
But, despite the active assistance of brokers, never expect that you will be given detailed instructions on how to make money on forex options. Therefore, if you decide to work in this industry, first study in detail all the nuances that are relevant to this sector of the Forex market. Nowadays, iq option fx options are the best solution for trading forex options in Europe and the CIS countries. They are available to all traders and they are not subject to restrictions that prohibit trading binary options in the countries of the European Union.
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