Have you heard about George Soros; The legendary manager of Quantum Hedge Fund who had made a cool $1 Billion profit from a single bet. In the early 1990s, one day he was sitting in his office discussing currency markets with his associate. Both of them were of the opinion that the British pound was overpriced and Bank of England could not sustain its price for long.
Acting on his hunch, he told his associate to purchase $10 Billion put and call options on British Pound and German Mark. It was a huge bet. He was in fact swaggering all the assets under his control on a single bet that may or may not pay off.
George Soros had perfect knowledge of the currency markets. He was sure of his bet and had the conviction that the Bank of England could not prop the overpriced British pound for long. His conviction was shared by other currency speculators. The only difference between him and them was the huge amount of the bet he placed. Bank of England was forced in just of 24 hours to take the British pound out of the European Monetary System and let it float freely. His gamble had paid off.
British pound plummeted in the currency markets. George Soros had won his bet. He became famous as the man who broke the British pound with his pictures in all the famous newspapers and magazines.
Daily more than $3 trillion are transacted in the currency markets. You as a forex trader can profit from the volatility in the currency markets using a number of methods. Forex options is one of the methods
You as a retail forex trader can trade any one of these contracts: spot, futures and options. Two more contracts are traded in the currency markets primarily for hedging by large institutions like banks, corporations and hedge funds. These are forwards and swap contracts.
What are forex options? Options are derivative instruments that allow you to buy or sell an underlying asset at a price known as exercise price before or on a certain date called strike date. There is no obligation on you to actually buy/sell the currency like that in futures.
The underlying asset in case of the forex options is the currency. Now, forex options give you the right but not the obligation to purchase/sell a certain amount of a particular currency on payment of a premium.
You may or may not exercise your right to buy/sell the currency. If the market price of the currency is above/below your strike price, you can buy/sell that currency by exercising your option.
If the currency market price is below/above the strike price of the forex options contract that you had purchased by paying a small premium; you can simply let the options contract expire. You only lose the premium.
There is a very good Non Directional Forex Options Trading Strategy that does not depend on the direction of the market. In other words you dont need to predict whether the currency price is going to go up or down and make your profit regardless.
This method is guaranteed to give you profits with an ROI of 30-50%. Try this method. It is risk free.
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