Forex options trading is an appealing alternative to regular forex trading because of its limited risk together with its ability to magnify returns by utilizing leverage. Nevertheless, it comes with all the usual peculiarities associated with options trading, such as time decay, exercise price, implied volatility and expiration dates.
Regular forex trading is a highly leveraged way of trading foreign currencies, with ratios per unit of investment ranging from 100:1 up to 400:1. With this kind of leverage, a strong move against you can realize a loss that is greater than your initial investment. For this reason, a trading plan using your regular forex broker must include a money management plan that either includes set stop losses, or enough capital to absorb moves against you so that you can use an averaging system until such time as the price retraces enough to become profitable.
Not so with forex options trading.
In this section of our site, we will consider all the various facets of forex options trading, such as where you can find suitable brokers, foreign currency options trading systems, currency futures options and forex binary options.
We will also consider how you can apply some regular option trading strategies to the currency markets - strategies such as range trading techniques and using short term straddle positions or victory spreads during releases of economic news.
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