From the perspective someone who has traded stock, futures and FX options extensively, both individually and in conjunction with the underlying instrument, I can say emphatically: [B]I would not trade a market that didn’t offer options.[/B]
The simple fact is with access to both spot and options (in the same account) you have more trading strategies and more risk management strategies.
The biggest complaint of retail FX traders has to be this: I called (for example) a 6 cent move higher in the EUR/USD – and lost $35,000 for my trouble. Every time I got long I got stopped out, and by the time I re-entered the market was higher – then it whipsawed again I get got stopped out again – and again and again.
On that note, here’s my quick follow up on Cuddykid’s question: Yes, there are lots of risk minimization strategies available using options together with spot. For example:
Get long a spot position and then buy a put option with a strike price where you would otherwise place your stop. To reduce the cost of the put premium, sell a call against your spot position at a strike price above where you would otherwise place your limit order.
(Then relax, let the strategy ride and play some golf.)
If the market moves lower (against) you can:
> Close your spot position at a loss
> Sell your put at a profit (but the profit on the put will not be as great as the loss on the spot).
> Buy back you short call at a profit.
Some hypothetical numbers:
Initiating the strategy:
$0 = Long spot position (no cost to account, margin is not a cost)
-$600 = Buy put option
+$250 = Sell (short) call option
-$350 = Net cost to initiate strategy
Closing the strategy:
-$900 = loss on spot
+$1,100 = from sale of put
-$150 = cost to buy back short call
+50 = Net gain of closing strategy.
Net P/L of overall strategy:
-$900 loss on spot
+$500 profit on put
+100 profit on call
-$300 loss on strategy (as opposed to net loss of $900 on spot alone).
Of course, these are just quick hypothetical numbers, but you can see how this risk minimization strategy can work.
Of course, you could alway choose to just continue to let the strategy ride - because your loss can be no greater than the difference between where you entered your spot and the strike price of your put less the premium of the call option!