Is there option trading in forex?
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There are options based on forex that mostly have no real connection to the actual forex market other than the fact that they are derived from them.
Yes. This is quite a good, brief, general overview of the subject …
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Options are hedged with large orders on the spot market. That’s what creates support & resistance.
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Yes, there are every type of option you can think of in the FX market. Popular are the exotics like Binaries, Barrier options (Knock In/Out, Touch, Double No Touch,ect). Contact your broker on trading them.
The most popular FX vanilla options expire daily at 10am New York.
In the case of barrier options, the option writers (banks) will want to keep price away and will deploy $XXX to keep the option worthless until expiration. You’ll often see this when price extends to a new extreme just before a large round number. On the flip side, there are banks that want to breach a level and will deploy tactics to pierce it, just to liquidate and have price reverse.
I’ve seen banks put a $100M Buy order on the market, see how many pips it moves, then sell so price returns back to where it started. They take the $100M divided by the pip move to predict the amount needed to move the market, capturing option premiums.
With Vanilla options, the banks will need to hedge accordingly. As price moves closer to an option strike, the writer will need to hedge exposure. That means buying spot FX in case a Call strike is breached. When price is above a Call level, the options start to get exercised, putting pressure on the level until price is back below it. These options affect price the most heading in to NY option expiration.
There’s currently been a massive option level on EurUsd at 1.0750. See how price reacted to that level last week, it will do the same thing Monday &/or Tuesday as well.
Edit: Also why EurUsd settles at 1.0700 the past few days at or around 10am NY.
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Yes, Forex options allow you to speculate on currency pairs’ price movements or hedge against potential losses.
But MT5 is providing that facility?
Forex trading primarily involves trading currency pairs, but options trading is not as prevalent in the forex market as it is in other financial markets like stocks or commodities. However, there are certain forex brokers and platforms that offer options trading on currency pairs. Forex options provide traders with the right, but not the obligation, to buy or sell a specific currency pair at a predetermined price (the strike price) on or before the expiration date. Options trading in forex can be used for hedging, speculation, or generating income through premium collection. Traders interested in forex options should ensure they have a thorough understanding of options trading strategies and market dynamics before engaging in this type of trading.
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