Forex options are options on a currency pair. They allow you to hedge or speculate on a currency pair while knowing ahead of time the maximum loss you can sustain. FX options can be traded on an exchange (such as the International Securities Exchange, Chicago Mercantile Exchange, or the Philadelphia Stock Exchange), or over the counter (OTC) on many forex brokers platforms.
If traded on an exchange a forex option will have a symbol that reflects the currency pair, strike price, and expiry date of the option. ISE FX Options™ provide you with exposure to rate movements in the global foreign currency market and can be easily accessed through all options-enabled brokerage accounts. These exchange-listed securities are cash-settled in U.S. dollars and have European style exercise.
FX Options can be traded on many currencies including the euro, British pound, Japanese yen, and Canadian dollar. Foreign exchange options are one of the most liquid options traded on the market with an estimated notional value of over $158,300 billion.
updated Aug 21, 2014
Ivan Daniel is a writer at GET.com a lifestyle and personal finance website. Email: firstname.lastname@example.org.
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