What is the Traditional Type of Forex Option?

Foreign Exchange trading or Forex trading can be a financially rewarding profession. It could pave the way for either tremendous wealth, if you are good at it, or bankruptcy, if you fail to use good judgment. Forex is currently the biggest financial market in the world with no less than $4,000,000,000 (4 billion) traded daily. It involves various types of transactions one of which is trading Forex options. There are two foremost types of Forex options, the traditional option and the SPOT or the Single Payment Options Trading. Below is the basic information regarding the former.

What the traders refer to as the traditional option is the one involving the “call/put” transaction. This type gives the buyer the right to buy from the option seller at a certain time and price. This however does not oblige him to make the purchase. This option is called the call/put option since currency trading deals with the buying and selling of currencies in pairs. This pair is called a “fx quote”. EUR/USD (euro/U.S. dollar) is an example of a Forex quote. Currencies are always in pairs because in every Fx transaction, when you buy one currency, you simultaneously sell another. Using the sample Fx quote EUR/USD, if a Fx trader decides to purchase an option of one lot of EUR/USD at 1.2000, the contract is called a “EUR call / USD put”. If this quote increases to 1.3000, the trader may exercise his option to gain a lot for only 1.2000 which he can in turn sell for profit. If the quote’s price moves below 1.2000, the trader’s option will expire without profit and he loses just the premium.

Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com – He has helped hundreds of people on Trading Forex with Options.

He has recently developed a free e-course showing you a step by step process for starting your Forex Trading easier. To learn how to start Forex Trading with Options without wasting your time and losing more money, visit http://www.NonDirectionTrading.com/members/FreeReport.htm