A currency option is a contract between a buyer and a seller that gives the buyer the right, but not the obligation, to trade a specific amount of currency at a predetermined price and within a predetermined period of time, regardless of the
market price of the currency; and gives the seller, or writer, the obligation to deliver the currency under the predetermined terms, ifand when the buyer wants to exercise the option. More factors affect the option price relative to the prices of other
foreign currency instruments. Unlike spot or forwards, both high and low volatility may generate a profit in the options market. For some, options are a cheaper vehicle for currency trading. For others, options mean added security and exact stop-loss order execution.
Currency options constitute the fastest-growing segment of the foreign exchange market. As of April 1998, options represented 5 percent of the foreign exchange market. The biggest options trading center is the United States, followed by the United Kingdom and Japan. Options prices are based on, or derived from, the cash instruments. Often, however, traders have misconceptions regarding both the difficulty and simplicity of using options. There are also misconceptions regarding the capabilities of options. Trading an option on currency futures will entitle the buyer to the right, but not the obligation, to take physical possession of the currency future. Unlike the currency futures, buying currency options does not require an initiation argin.
The option premium, or price, paid by the buyer to the seller, or writer, reflects the buyer's total
risk. However, upon taking physical possession of the currency future by exercising the option, a
trader will have to deposit a margin. The
currency price is the central building block, as all the other factors are compared and analyzed against it. It is the currency price behavior that both generate the need for options and impacts on the profitability of options.
Belum ada tanggapan untuk "Options Market"
Post a Comment
Kritik dan Saran yang membangun dari Anda sangat KAMI harapkan.
Silahkan isi KOMENTAR anda yang membangun untuk kemajuan dan koreksi di blog ini. No Sara, No Racism