Option Trading becomes a weighty alternative to exchange trading on the forex market. Terms of options trading is significantly different from the standard, rather risky conditions in other markets except in this list can only be trading futures. Significant differences are caused by the fact that in determining the value of the option there is a stable financial base. I.e. There is no need at all times to monitor the changes in quotations to conveniently purchase the asset.
Moreover, options, although the tool is similar to futures, largely differ from them. And in fact, and in another case, a trader has to deal with contracts. But in the case of a futures contract it has a very strict framework, and is an essential commitment of both sides to each other. In the case of options trading liabilities, as such, does not exist. That is, the options market provides an opportunity, not obliging its members to mandatory financial transactions.
This possibility is already appreciated by millions of traders worldwide. But everyone knows that it is absolutely all financial markets could not exist if one of the parties did not bear some losses. After all, the difference from the winning trades and losing orders and make profit by those involved in the trade. And if you have won, and that is the one who has suffered losses. Yes, indeed it is.
But the difference between options contracts and other financial instruments in international trade lies in the fact that the amount of the loss is not comparable in both cases.
An example of the functioning options market
If the foreign exchange trading in the commodity market, or loss of profits without limitation can deplete all the cash deposit, in the case of the options provided in advance the amount of loss and is fixed in nature. Moreover, options are not binding. Thus, the loss-making option holder loses only the premium paid for the opportunity to purchase the option. For example, this might look like.
One market participant intends to acquire a marketable asset at a price of 1000 dollars. But he had nowhere to store it, and bids will take place through Nedolya. During this time, you may find that the price of this commodity rises. And then for him will have to pay a large sum. Optional market gives the opportunity to buy not the product itself, and the opportunity to purchase this product at a price that is formed today, at the time of the purchase option. At the same time it does not pay for all the goods, and only a very small percentage of its current value. This can 02.01 percent. What happens in the future?
A week later, when the time came the sale of goods, it is a kind of economic reasons has become no longer cost $ 1,000, and $ 1 150. However, the option holder has to buy it at that price, which was listed on the acquisition of the option. However, he loses the prize spent - about 10-20 dollars, but it has a profit from the rise in price of goods cost 120-130 dollars. But the supplier of the goods, he is - the other party to the option contract is losing its share of the profits, as has already committed to deliver the goods at a price of 1000 dollars.
In the opposite case, if the price, on the contrary, has become lower and dropped to a mark of $ 920, the option holder can buy the product at a lower price, ie $ 920, because it has no hard commitments, as is the case with futures. And his loss again will be limited to 10-20 dollars spent on the purchase of an option, or - the opportunity to buy goods at a lower price. To draw an analogy, the option, in its essence, is a kind of insurance policy that allows use in adverse changes in the existing opportunity in their favor.
Some of the nuances of the options market
Surely those who have not yet faced the options market, might suggest that such trading is associated with some risk, because you never know exactly how the price will change in the future. At the same time, and still need to know on what kind of date such change occurs. But I must say that such a concern is not unfounded.
In favor of the fact that trade contracts, and in particular - the options market, has enriched the already many people around the world. It is trading on options, many well-known millionaires and billionaires made their fortunes. Yes, of course, the risk is there. However, it is always and in all activities, not just financial. But it is necessary to look at the actual options trading. Let's say a trader has been acquired 20 options total cost of 10 000 dollars.
Half of them turned out to be unprofitable. That is, the trader immediately lost to them for a total of, say -20 percent. But the other 10 options have a positive outcome of the price. What is obtained in this case? All the advantages consist in the fact that the profits from the success of the transaction can be one and a half times higher than the nominal value. That is, 10 of the remaining profitable options will not only bring high returns, but with a surplus override the costs incurred on the loss-making options. But there is one point in respect of the profits. With the proper analysis of the market situation, the wave may have a profit from all the purchased options.
For this purpose, we should pay attention to studying the characteristics of the market. A lot of this will help the study of fundamental analysis, which gives a clear idea of upcoming economic events that affect pricing. Many can affect the price change and analytical data on discount rates of major currencies in the national banks of leading countries - participants of the international market. And if you spend a little time for the acquisition of these skills, the optional trade will not frighten its unpredictability.