What Is Forex

The Forex options market began as an over-the-counter financial system for large banks, financial organizations and boastfully international corporations to hedge against foreign currency exposure.
Forex option trading has come forth as an alternative investment vehicle for a lot of traders and investors. As an investment tool, Forex option trading provides both big and little investors with better flexibility when ascertaining the appropriate Forex trading and hedging techniques to apply.
Most Forex options trading are conducted thru telephone, as there are only a few Forex brokers offering net Forex option trading programs.
A Forex option is a financial currency agreement giving the Forex option purchaser the right, but not the obligation, to buy or sell a particular Forex spot contract at a particular price on or before the expiration date. The sum the Forex option purchaser pays to the Forex option seller for the Forex option contract rights is known as the Forex option "premium”.
Either the buyer, or holder, of a foreign currency option has the option to sell the foreign currency option contract before expiration, or he or she may decide to hold the foreign currency options contract till expiration and exercise his or her right to take a position in the underlying spot foreign currency. The act of using the foreign currency option and taking the subsequent underlying position in the foreign currency spot market is called "assignment" or being "assigned" a spot positioning.
The only initial liability of the foreign currency option purchaser is to pay the premium to the seller up front once the foreign currency option is initially bought. Once the premium is paid, the foreign currency option holder has no additional liability till the foreign currency option is either offset or runs out.

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