Does decay exsit in Forex trading??
Yes, certainly - with forex options.
Decay = rollover.
Didn’t know rollover is also called decay. Thanks!
…It’s not.
Decay (in terms of options trading) relates to theta- time decay.
Roll (in terms of forex trading) relates to a debit or credit to equity based on interest rate differntials on currencies.
In theory, you can make the argument that:
Selling premium = positive theta = positive roll
Buying premium = negative theta = negative roll
Not all 1-1, but, in theory pretty similar.
In spot forex there’s no such thing as decay. As has been noted, that’s an options market term.
The interest rate carry that’s been discussed is equivalent to the basis seen in the futures market - albeit expressed in a day-to-day fashion rather than being priced in for a contract duration.