Hub You
#1 in Business Subscribe Email Print

You are here: Home > Finance > Currency Trading > Forex Options Market Overview

Tags

  • offset
  • order
  • rights
  • maintenance margin
  • entire premium
  • options buyer

  • Links

  • Discover What Luxury Cruises Are All About With Crystal Cruise Lines
  • Presentation Skills - Keeping the Blackberries at Bay
  • 9 Secrets Mark Twain Taught Me About Advertising
  • Hub You - Forex Options Market Overview

    Internet Marketing Coaching - Top 4 Things to Avoid When Choosing a Coach
    Internet marketing coaching is almost a necessary thing in today’s fast moving internet environment. It is necessary to move as fast as you want to when you first get online. You see, when you get started, you know…nothing. And how do you learn the fastest? By learning from people who have done it already.That is the bottom line – you need internet marketing coaching.But there is good coaching and bad coaching.This article is about bad coaching, which you want to avoid at all costs.So what is bad coaching?1) Getting coaching from someone who makes less than you do. Look, if they are not already doing what you want to do – or at least better than you are not – how do you think they will be able to teach you?2) Getting coaching from someone who cannot effectively communicate. Make sure you can communicate with them via the communication type that you will be using for the coaching. If it is telephone coaching, spend 5 minutes on the phone with them before you buy. If it is email coaching (most popular) ask them a question via email and see how well they answer you. Can you learn from this person?3) Getting coaching if you are not willing to listen. Look, they make $10,000 per month, you make $500 per month. Do what they say! When you are making $10,000 per month, you can do it your own way!4) Getting coaching if you have no time to follow directions. If you are going to pay $500 per month fo
    every option transaction.

    Forex Call Option - A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

    The Forex Put Option - A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign e

    Career Change - Emotional Intelligence for Knowledge Workers?
    Nowadays we can expect to survive the second half of our lives and as our work is knowledge-based - we knowledge workers are not finished after 30 years on the job - Are we merely bored?There are three ways to develop another career: The first way is to really start a career. Our original career decision (at school or college) may have been simply around 'getting a job to make some money' or just to 'get into the job market' in some way. The advice and guidance that we received at this time may have been limited by their own knowledge of what's possible.In this case the people looking for second careers who have achieved a modest success in their first jobs may be looking to change organisations where they can find challenge. The house is empty with the children gone - they need income as well. But above all they need challenge.The second way to prepare for the second half of your life is to develop a career alongside your 'full-time' role. The classic example of this is working in a not-for-profit-organisation taking a few hours of our week. But there are other ways of building your experience and skills in a hobby or interest to run alongside your 'day job' so that when the time comes for you to change you can 'hit the ground running', in your new role.You really need to begin what you want to do in the second half of your career long before you enter it. If you haven't taken time out to do this you will need all the career coachi
    The forex options market started as an over-the-counter (OTC) financial vehicle for large banks, financial institutions and large international corporations to hedge against foreign currency exposure. Like the forex spot market, the forex options market is considered an "interbank" market. However, with the plethora of real-time financial data and forex option trading software available to most investors through the internet, today's forex option market now includes an increasingly large number of individuals and corporations who are speculating and/or hedging foreign currency exposure via telephone or online forex trading platforms.

    Forex option trading has emerged as an alternative investment vehicle for many traders and investors. As an investment tool, forex option trading provides both large and small investors with greater flexibility when determining the appropriate forex trading and hedging strategies to implement.

    Most forex options trading is conducted via telephone as there are only a few forex brokers offering online forex option trading platforms.

    Forex Option Defined - A forex option is a financial currency contract giving the forex option buyer the right, but not the obligation, to purchase or sell a specific forex spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the forex option buyer pays to the forex option seller for the forex option contract rights is called the forex option "premium."

    The Forex Option Buyer - The buyer, or holder, of a foreign currency option has the choice to either sell the foreign currency option contract prior to expiration, or he or she can choose to hold the foreign currency options contract until expiration and exercise his or her right to take a position in the underlying spot foreign currency. The act of exercising the foreign currency option and taking the subsequent underlying position in the foreign currency spot market is known as "assignment" or being "assigned" a spot position.

    The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller up front when the foreign currency option is initially purchased. Once the premium is paid, the foreign currency option holder has no other financial obligation (no margin is required) until the foreign currency option is either offset or expires.

    On the expiration date, the call buyer can exercise his or her right to buy the underlying foreign currency spot position at the foreign currency option's strike price, and a put holder can exercise his or her right to sell the underlying foreign currency spot position at the foreign currency option's strike price. Most foreign currency options are not exercised by the buyer, but instead are offset in the market before expiration.

    Foreign currency options expires worthless if, at the time the foreign currency option expires, the strike price is "out-of-the-money." In simplest terms, a foreign currency option is "out-of-the-money" if the underlying foreign currency spot price is lower than a foreign currency call option's strike price, or the underlying foreign currency spot price is higher than a put option's strike price. Once a foreign currency option has expired worthless, the foreign currency option contract itself expires and neither the buyer nor the seller have any further obligation to the other party.

    The Forex Option Seller - The foreign currency option seller may also be called the "writer" or "grantor" of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take the opposite underlying foreign currency spot position if the buyer exercises his right. In return for the premium paid by the buyer, the seller assumes the risk of taking a possible adverse position at a later point in time in the foreign currency spot market.

    Initially, the foreign currency option seller collects the premium paid by the foreign currency option buyer (the buyer's funds will immediately be transferred into the seller's foreign currency trading account). The foreign currency option seller must have the funds in his or her account to cover the initial margin requirement. If the markets move in a favorable direction for the seller, the seller will not have to post any more funds for his foreign currency options other than the initial margin requirement. However, if the markets move in an unfavorable direction for the foreign currency options seller, the seller may have to post additional funds to his or her foreign currency trading account to keep the balance in the foreign currency trading account above the maintenance margin requirement.

    Just like the buyer, the foreign currency option seller has the choice to either offset (buy back) the foreign currency option contract in the options market prior to expiration, or the seller can choose to hold the foreign currency option contract until expiration. If the foreign currency options seller holds the contract until expiration, one of two scenarios will occur: (1) the seller will take the opposite underlying foreign currency spot position if the buyer exercises the option or (2) the seller will simply let the foreign currency option expire worthless (keeping the entire premium) if the strike price is out-of-the-money.

    Please note that "puts" and "calls" are separate foreign currency options contracts and are NOT the opposite side of the same transaction. For every put buyer there is a put seller, and for every call buyer there is a call seller. The foreign currency options buyer pays a premium to the foreign currency options seller in every option transaction.

    Forex Call Option - A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

    The Forex Put Option - A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign ex

    How to Get Massive Website Traffic for Free
    If you have just started a website then listen closely. If you are an experienced Webmaster you just may learn a thing or two as well. The fact is, if you want real people to come to your website it is going to take a little time and a lot of determination. Do not let this distract you. Thousands of people use the following techniques effectively every single day, bringing in massive website traffic that creates an enormous cash flow for their home business.Most of us know the two greatest factors that create incredible website traffic if worked the right way. These two things are links and most importantly quality, keyword optimized content on your site. What many do not know, and I hope to shed some like on the topic, is the several ways you can bring traffic to your site through non traditional methods of link building and content creation.When we start our first website, we are told to find as many reciprocal links as possible. This means finding quality, relevant websites, and requesting to link with them. Reciprocal linking can be good but I have found that there are other things I could be doing with my time that will pay off more than just reciprocal linking. As reciprocal linking is not a bad thing, I would not say to stop doing it. I would just say do not spend hours a day on it. The number one linking strategy I have found to provide the best results and in turn sending loads of website traffic to my site is what I call triangular linki
    rex option seller for the forex option contract rights is called the forex option "premium."

    The Forex Option Buyer - The buyer, or holder, of a foreign currency option has the choice to either sell the foreign currency option contract prior to expiration, or he or she can choose to hold the foreign currency options contract until expiration and exercise his or her right to take a position in the underlying spot foreign currency. The act of exercising the foreign currency option and taking the subsequent underlying position in the foreign currency spot market is known as "assignment" or being "assigned" a spot position.

    The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller up front when the foreign currency option is initially purchased. Once the premium is paid, the foreign currency option holder has no other financial obligation (no margin is required) until the foreign currency option is either offset or expires.

    On the expiration date, the call buyer can exercise his or her right to buy the underlying foreign currency spot position at the foreign currency option's strike price, and a put holder can exercise his or her right to sell the underlying foreign currency spot position at the foreign currency option's strike price. Most foreign currency options are not exercised by the buyer, but instead are offset in the market before expiration.

    Foreign currency options expires worthless if, at the time the foreign currency option expires, the strike price is "out-of-the-money." In simplest terms, a foreign currency option is "out-of-the-money" if the underlying foreign currency spot price is lower than a foreign currency call option's strike price, or the underlying foreign currency spot price is higher than a put option's strike price. Once a foreign currency option has expired worthless, the foreign currency option contract itself expires and neither the buyer nor the seller have any further obligation to the other party.

    The Forex Option Seller - The foreign currency option seller may also be called the "writer" or "grantor" of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take the opposite underlying foreign currency spot position if the buyer exercises his right. In return for the premium paid by the buyer, the seller assumes the risk of taking a possible adverse position at a later point in time in the foreign currency spot market.

    Initially, the foreign currency option seller collects the premium paid by the foreign currency option buyer (the buyer's funds will immediately be transferred into the seller's foreign currency trading account). The foreign currency option seller must have the funds in his or her account to cover the initial margin requirement. If the markets move in a favorable direction for the seller, the seller will not have to post any more funds for his foreign currency options other than the initial margin requirement. However, if the markets move in an unfavorable direction for the foreign currency options seller, the seller may have to post additional funds to his or her foreign currency trading account to keep the balance in the foreign currency trading account above the maintenance margin requirement.

    Just like the buyer, the foreign currency option seller has the choice to either offset (buy back) the foreign currency option contract in the options market prior to expiration, or the seller can choose to hold the foreign currency option contract until expiration. If the foreign currency options seller holds the contract until expiration, one of two scenarios will occur: (1) the seller will take the opposite underlying foreign currency spot position if the buyer exercises the option or (2) the seller will simply let the foreign currency option expire worthless (keeping the entire premium) if the strike price is out-of-the-money.

    Please note that "puts" and "calls" are separate foreign currency options contracts and are NOT the opposite side of the same transaction. For every put buyer there is a put seller, and for every call buyer there is a call seller. The foreign currency options buyer pays a premium to the foreign currency options seller in every option transaction.

    Forex Call Option - A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

    The Forex Put Option - A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign e

    Email Ninja Moves: 7 Ways to Tame Your Inbox
    Is dealing with your email becoming like a second job--you know, you can't really get anything done because you're always stuck in your inbox?Or you look in your inbox and feel like you're being buried alive by the 500 emails that are staring you in the face and mocking your attempts to get the situation under control?I was listening to an interview Merlin Mann did with David Allen (author of the book "Getting Things Done") about email management, and seriously, it may have changed my life.Here are some of the nuggets of wisdom I picked up from these two efficiency masters about taming the dreaded email monster:1) Your email is not a work space; it's an information input tool, just the same as your voicemail, your inbox on your desk or your mailbox in front of your house.It's a place to pick up information, not a place to linger, sort, fiddle and scroll endlessly.Merlin puts it this way, "If you're a short order cook, you're in the business of making sandwiches, not stacking orders."To be more efficient with email, we need to pick up our orders, then get back into the kitchen and make those sandwiches!2) Check emails fast and only at certain times.David says that inboxes get clogged up due to a lack of executive decision making skills. If you train yourself to make fast, executive decisions about the stuff in your inbox when it first appears, you'll be able to get through email quickly and respond,

    Foreign currency options expires worthless if, at the time the foreign currency option expires, the strike price is "out-of-the-money." In simplest terms, a foreign currency option is "out-of-the-money" if the underlying foreign currency spot price is lower than a foreign currency call option's strike price, or the underlying foreign currency spot price is higher than a put option's strike price. Once a foreign currency option has expired worthless, the foreign currency option contract itself expires and neither the buyer nor the seller have any further obligation to the other party.

    The Forex Option Seller - The foreign currency option seller may also be called the "writer" or "grantor" of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take the opposite underlying foreign currency spot position if the buyer exercises his right. In return for the premium paid by the buyer, the seller assumes the risk of taking a possible adverse position at a later point in time in the foreign currency spot market.

    Initially, the foreign currency option seller collects the premium paid by the foreign currency option buyer (the buyer's funds will immediately be transferred into the seller's foreign currency trading account). The foreign currency option seller must have the funds in his or her account to cover the initial margin requirement. If the markets move in a favorable direction for the seller, the seller will not have to post any more funds for his foreign currency options other than the initial margin requirement. However, if the markets move in an unfavorable direction for the foreign currency options seller, the seller may have to post additional funds to his or her foreign currency trading account to keep the balance in the foreign currency trading account above the maintenance margin requirement.

    Just like the buyer, the foreign currency option seller has the choice to either offset (buy back) the foreign currency option contract in the options market prior to expiration, or the seller can choose to hold the foreign currency option contract until expiration. If the foreign currency options seller holds the contract until expiration, one of two scenarios will occur: (1) the seller will take the opposite underlying foreign currency spot position if the buyer exercises the option or (2) the seller will simply let the foreign currency option expire worthless (keeping the entire premium) if the strike price is out-of-the-money.

    Please note that "puts" and "calls" are separate foreign currency options contracts and are NOT the opposite side of the same transaction. For every put buyer there is a put seller, and for every call buyer there is a call seller. The foreign currency options buyer pays a premium to the foreign currency options seller in every option transaction.

    Forex Call Option - A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

    The Forex Put Option - A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign e

    Salon Equipment Carts
    Salons that expand their services need to appropriately display the equipment and products they use. Hair care products, skin care and body products are sometimes also kept for sale. In order to make them attractive, on display, it is important to set them up in an organized and attractive manner to enhance sales.There are a number of racks, carts and trolleys available in the local market. The type of display racks salon owners choose depends on the size of the inventory that will be displayed. The quantity and the quality have to be considered. Hair salon equipment retailers offer a large selection of display tables, racks and shelves for sale.The salon carts enhance the look of the premises even more. These stylish trolleys and carts can even look great in waiting rooms, offices, lobbies and private dressing rooms. They come in convenient and compact designs. They can also be customized to fit the requirement and need of the salon owners. These carts and trolleys work as a great space savers.Some are made of oak wood. They have glass tops and contain high-grade, black metal bases. They are great for holding supplies. There are aluminum carts that are pre- assembled. They have metal trays, a metal basket at the bottom and a number of storage compartmentsThere are carts with holders for tiny bowls. They also have holders for aluminum foil with serrated edges, for easy tearing. There are wooden spa utility carts that have trays and
    s move in a favorable direction for the seller, the seller will not have to post any more funds for his foreign currency options other than the initial margin requirement. However, if the markets move in an unfavorable direction for the foreign currency options seller, the seller may have to post additional funds to his or her foreign currency trading account to keep the balance in the foreign currency trading account above the maintenance margin requirement.

    Just like the buyer, the foreign currency option seller has the choice to either offset (buy back) the foreign currency option contract in the options market prior to expiration, or the seller can choose to hold the foreign currency option contract until expiration. If the foreign currency options seller holds the contract until expiration, one of two scenarios will occur: (1) the seller will take the opposite underlying foreign currency spot position if the buyer exercises the option or (2) the seller will simply let the foreign currency option expire worthless (keeping the entire premium) if the strike price is out-of-the-money.

    Please note that "puts" and "calls" are separate foreign currency options contracts and are NOT the opposite side of the same transaction. For every put buyer there is a put seller, and for every call buyer there is a call seller. The foreign currency options buyer pays a premium to the foreign currency options seller in every option transaction.

    Forex Call Option - A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

    The Forex Put Option - A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign e

    7 Keys To Powerful Presentations That Attract More Clients
    Have you noticed that speakers at conferences and events are considered as the “go to” expert in their field just because they are positioned as a speaker?Speaking and presenting are great ways of extending your reach and promoting your expertise so that you attract more clients.Here are 7 tips to enhance your professional presentations.1. DO YOUR RESEARCH – If you have been approached to speak at an event, make sure that you check with the events organiser who has been the most recent speakers and what they talked about. You need to make sure that you provide value to the attendees and do not repeat what others have spoken about.2. PREPARE FOR SUCCESS – As the group you are speaking with will probably have had other events, ask the event organiser what success will look like for their attendees.3. MAKE IT RELEVANT – Once you know who your attendees will be and their background, make sure that you customise your presentation with case studies that are relevant to their industry, geography and background.4. BE TECH SAVVY – If you plan to include video and audio clips in your presentation, make sure that these are of a high quality and that launching the audio or video clips runs smoothly. Only use technology you are proficient in using.5. SEEK SIGNALS – As you start your presentation, be aware of signals you are getting back from your audience. Different groups will react to your same materials in different ways.<
    every option transaction.

    Forex Call Option - A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

    The Forex Put Option - A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option "premium."

    Please note that "puts" and "calls" are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

    Plain Vanilla Forex Options - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic forex option contracts that are traded through an over-the-counter (OTC) forex options dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or a forex put option contract.

    Exotic Forex Options - To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific's investor's needs by an exotic forex options broker, are generally not very liquid, if at all.

    Intrinsic & Extrinsic Value - The price of an FX option is calculated into two separate parts, the intrinsic value and the extrinsic (time) value.

    The intrinsic value of an FX option is defined as the difference between the strike price and the underlying FX spot contract rate (American Style Options) or the FX forward rate (European Style Options). The intrinsic value represents the actual value of the FX option if exercised. Please note that the intrinsic value must be zero (0) or above - if an FX option has no intrinsic value, then the FX option is simply referred to as having no (or zero) intrinsic value (the intrinsic value is never represented as a negative number). An FX option with no intrinsic value is considered "out-of-the-money," an FX option having intrinsic value is considered "in-the-money," and an FX option with a strike price at, or very close to, the underlying FX spot rate is considered "at-the-money."

    The extrinsic value of an FX option is commonly referred to as the "time" value and is defined as the value of an FX option beyond the intrinsic value. A number of factors contribute to the calculation of the extrinsic value including, but not limited to, the volatility of the two spot currencies involved, the time left until expiration, the riskless interest rate of both currencies, the spot price of both currencies and the strike price of the FX option. It is important to note that the extrinsic value of FX options erodes as its expiration nears. An FX option with 60 days left to expiration will be worth more than the same FX option that has only 30 days left to expiration. Because there is more time for the underlying FX spot price to possibly move in a favorable direction, FX options sellers demand (and FX options buyers are willing to pay) a larger premium for the extra amount of time.

    Volatility - Volatility is considered the most important factor when pricing forex options and it measures movements in the price of the underlying. High volatility increases the probability that the forex option could expire in-the-money and increases the risk to the forex option seller who, in turn, can demand a larger premium. An increase in volatility causes an increase in the price of both call and put options.

    Delta - The delta of a forex option is defined as the change in price of a forex option relative to a change in the underlying forex spot rate. A change in a forex option's delta can be influenced by a change in the underlying forex spot rate, a change in volatility, a change in the riskless interest rate of the underlying spot currencies or simply by the passage of time (nearing of the expiration date).

    The delta must always be calculated in a range of zero to one (0-1.0). Generally, the delta of a deep out-of-the-money forex option will be closer to zero, the delta of an at-the-money forex option will be near .5 (the probability of exercise is near 50%) and the delta of deep in-the-money forex options will be closer to 1.0. In simplest terms, the closer a forex option's strike price is relative to the underlying spot forex rate, the higher the delta because it is more sensitive to a change in the underlying rate.

    HTTP = HTML link (for blogs, profiles,phorums):
    <a href="http://www.iadvice.info/article/96167/iadvice-Forex-Options-Market-Overview.html">Forex Options Market Overview</a>

    BB link (for phorums):
    [url=http://www.iadvice.info/article/96167/iadvice-Forex-Options-Market-Overview.html]Forex Options Market Overview[/url]

    Related Articles:

    Laying Your Cards On The Table

    Is This What PR's All About?

    Online Pen Pal and Online Pen Pals

    Bookmark it: del.icio.us digg.com reddit.com netvouz.com google.com yahoo.com technorati.com furl.net bloglines.com socialdust.com ma.gnolia.com newsvine.com slashdot.org simpy.com shadows.com blinklist.com