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Why Trade FX Options?

20 December 2011 Author: Joanna Odella

If you are a forex broker and are looking for flexibility as well as versatility above and beyond Spot FX, FX options may be a perfect fit. So what exactly are options?  FX options are securities that allow currency traders to realize gains without purchase requirements. Options allow the buyer the right (but not the obligation) to purchase or sell options at a set price and time – so you can feel more in control. Additionally, by incorporating leverage, forex options magnify returns and set a firm downside risk level. In simple terms, FX options give forex traders the chance to limit risk with unlimited profit potential.

After reading the benefits of trading options, you might wonder if there is a downside. Of course. Like all trading, there are always risks and never any guarantees. FX options are no different. First of all, it can be challenging and tricky to predict the exact period and price of market movements. Secondly, premiums vary based on the strike price and date of the option therefore risks and reward ratios vary as well. Finally, like most FX trading, many believe you may be playing against the odds.  

Despite the risks, many brokers trust that the benefits of options trading outweigh the downside for their customers. The ability to set the price and expiration date of a trade and pay less money up front than a spot FX position is significant. On top of that, the comfort of knowing that risk is limited to the amount paid to purchase the option keeps top traders active.  Forex brokers also enjoy that options traders tend to have larger deposit balances and remain active longer than retail FX traders.  

After receiving requests from many customers for the ability to offer options trading to clients, Boston Technologies added FX Options Trader to its robust portfolio of FX trading solutions this past November. You can view a demo of FX Options Trader on our website by clicking here. FX brokers who offer an FX options trading platform have found great benefit in giving their customers the tools to increase activity and trade volume with higher leverage, hedging strategies and no margin calls.