Forex Investment and Currency Trading

An option contract is an agreement which gives the buyer (holder) the right but not the obligation to buy:

a pre-agreed quantity of a particular underlying asset,
at a pre-agreed price (the “strike price”),
at any time before (called an “American-style” option) or on (called “European-style”) a pre-agreed date (the “expiry date”)

In return for granting this right, the buyer pays the seller of the option (called the “writer”) the option price (“premium”).
Options are conditional forward transactions. A characteristic feature of an option is its asymmetrical risk profile: Because of their different rights and obligations, the buyer and the seller do not have the [...]

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A currency forward is a contractual agreement between two parties to exchange two agreed amounts of currencies on a certain date in the future.
Term of currency forwards
There are at least three banking days between the execution and final settlement of a currency forward transaction. The term of a currency forward usually ranges from one month up to two years. In individual cases, the term may be even longer.
Final settlement
Currency forwards general provide for final settlement in the form of physical delivery. The counterparties exchange the relevant amounts of currency on the due date as agreed.
Closing of positions
The closing out of [...]

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The leverage of an option – viewed as a static reference value – essentially characterizes the relationship between the capital sum which would have to be expended for the purchase of the relevant underlying asset (i.e. the market price of the underlying asset) and the capital required for the purchase of the option (i.e. the market price of the option). The degree of option provides an indication of the degree to which you, as the buyer of an option, will participate, positively or negatively, in a change in the market price of the underlying asset.
However, the effects of the leverage [...]

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In order to be able to come to valuations for options, use is made of, among other things, certain static and dynamic reference values.
Dynamic reference values measure changes in the price of the option on the basis of variable parameters such as volatility or term. With their help, it is possible to estimate the future performance of options from today’s perspective. To allow this to be determined accurately enough, complex option valuation models are required.
The static reference values include:

Intrinsic value
Time value
Premium
Break-even point
Leverage

These reference values offer you, as an investor, assistance in making an investment decision involving the choice of an [...]

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