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Virgil R Cook

Online Success With Virgil R Cook

Posts Tagged ‘Brokers’

The Forex Option – Hedging Your Bets Against The Future

August 23rd, 2009 | Author: Virgil Cook

All speculation-based markets are full of uncertainty, and none more so than the forex market. A currency might be strong and vibrant today, weak and sickly a month from now. One way to guard against major fluctuations like that is through forex option trading.

A forex option is when you buy the right — but not the obligation — to buy or sell a particular currency at a particular rate any time between now and the expiration date of the option.

Let’s say you’re worried that the Japanese yen is going to drop in value sometime in the next six months. You might buy an option that basically locks in the current exchange rate for whatever period of time the option seller allows, usually anywhere from 30 days to six months. You set a number of yen, too. Say you choose 10,000 yen at a rate of 116 yen per U.S. dollar for three months. The option basically says, “I may want to sell 10,000 yen sometime in the next three months, but I’m worried the yen is going to devalue in that time. So I’ve locked in this rate of USD/JPY 116.” Read the rest of this entry »

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Posted in Forex | Tags: Brokers, forex, forex market, forex option, heavy-duty trader, individual traders, internet marketing | No Comments »

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