Binary Options

What is Currency Options?

Currency Options

A Currency Options (CO) Contract is an agreement that entitles the investorto buy or sell a Currency Futures Contract on a day in the future at a particular price. CO is a category of Binary Options that allows the investors to purchase theoriginal Currency Future. Put Options entitles them to sell it. Investors have to pay a premium if they do not sell the Option. The premium is consideredon the basis of the unpredictability of the exchange rate.

Peculiarities

  • Uniform COs Contracts traded on aofficial exchange exclude COs interparty risk.
  • Protect against exchange rate movements in investment portfolios.
  • Limit losses to the premium as financiersdon’t have to purchase or offerthe COs of the particular Option on expiry.
  • Allow the investor to stipulate prices for foreign tradegoals.
  • Allow financiers to benefit of price fluctuations in the exchange rate because they can predict as to whether the exchange rate will grow or fall.
  • Highly liquid sphere.
  • The investors may have to make extra payments daily should their initial margin amount beinadequate because of fluctuations in the option’s currency
  • Financiers may do not get thepremium if they decide not to dispose of the Option.
  • Who can buy Currency Options?

    Arbitrageurs use Cos to profit from movements in price of analogous products in various markets. To stockholders, traders, merchants and tourists COs help to evade the changes in the exchange rate. Thus, investors earn money with COs on short-term differences in prices. Some financiers also grow with COS the general portfolio’s execution over the prolonged periods.

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