Forex Investment and Currency Trading

Options are characterized by an asymmetrical risk profile. This means that opportunities and risks are not shared equally between the buyer and the writer (seller).

The risk for the option buyer is limited to the loss of the option price (premium) paid.
The loss potential for the writer, on the other hand, is higher. When he writes a call, his risk of loss is unlimited. When he writes a put, it is limited to the amount of the strike price less the option price (premium) received.

Market price risk
Risk associated with changes in price of underlying (delta)
Options are fundamentally subject to the same [...]

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Options provide you with opportunities to profit from, or hedge against, anticipated movements in the price of an underlying asset by buying or selling call or put options. You may do this by pursuing a number of different strategies. The following possible applications are presented as examples of these.
Speculation on falling interest rates by buying a cal (long call)
In return for payment of a premium, you as the buyer of an interest-rate call acquire the right, but not the obligation, to purchase a particular bond (underlying asset) at a pre-agreed price on a pre-agreed date. You as the buyer anticipate [...]

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Buying a put option (long put)
As the buyer of a put option, you acquire the right, against payment of a premium, to sell a pre-agreed amount of a certain underlying asset at a pre-agreed price. You are, however, not required to exercise the option.
As the buyer of the put, you anticipate falling prices and/or increasing volatility of the underlying asset within the remaining term of the option.
Buying a put option (long put)
Profile of profit or loss on expiry date

If the price of the underlying asset falls below the strike price, you as the holder of the put option can sell [...]

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Buying a call option (long call)
As the buyer of a call option, you acquire the right, against payment of a premium, to buy a pre-agreed amount of a certain underlying asset at a pre-agreed price. You are, however, not required to exercise the option.
As the buyer of the call, you anticipate rising prices and/or increasing volatility of the underlying asset within the remaining term of the option.
Buying a call option (long call)
Profile of profit or loss on expiry date

If the price of the underlying asset rises above the strike price plus the option price during the term of the option, [...]

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