Forex Investment and Currency Trading

An option is another type of derivative. Currency options allow but do not require an investor to buy or sell a specified amount of foreign currency at a specified price at any time up to a specified date.
Call and Put Options
The buyer of a call option is given the right to buy a foreign currency at a specified price, the strike price.
A buyer of a put option has the right to sell a foreign currency at a specified strike price. For acquiring the right to buy at a specified price on a call option, die buyer has to pay premium [...]

[Read more →]

With the current market risk aversion still in place, and the year end outlook for EM currencies mixed at best, the risk of dollar strength has remained priced into EM volatility surfaces. The USD/BRL implied volatility surface still indicates risk aversion priced in through historically high risk reversal levels. Thin markets and possible trade unwinds point to a higher spot USD/BRL as well to the end of 2008/early 2009. Graphs below show USD/BRL spot at a significant point, as well as the 1-month 25 delta risk reversal staying within a steep upward channel.
Because of the skew, taking advantage of this [...]

[Read more →]

Principally, there are two types of options. The right to buy is a call. The right to sell is a put. You are said to have the right to “call” the stock, commodity future, or currency if you purchase a call. You are said to have the right to “put” the stock, commodity future, or currency if you buy a put.
Puts and Calls
A call is the right to purchase the underlying long currency. A put is the right to sell the underlying long currency. In FOREX , this essentially means being long the other currency in the pair or cross.
Of course, [...]

[Read more →]

Options, like futures, came into existence to help institutions and companies cope with increased fluctuations in the foreign exchange markets. Investors who buy options have the right, if they choose, to buy a specific amount of currency at a set price on or before a specific date. At its most fundamental level, an option is a choice.
Options are an effective hedging device against currency fluctuations. They allow a buyer to lock in an exchange rate and then use the option only if the situation warrants. They buyer, however, must pay a premium at the outset for an option.
A good way [...]

[Read more →]

European Majors: As the market madness of these past days seems to be fading, vols in ge neral have come off their highs. EURUSD vols are softer across the curve on a weighted fashion with 1W down by as much as 7.50 vols and 1Y lower by 1.20 vols. EURUSD RR have eased in the direction of the EUR calls. GBPUSD and USDCHF vols followed a similar trend while liquidity remained poor today as nervousness is not gone yet.
JPY & Pacific: Liquidity in USDJPY vols have improved today, with sellers of vols appearing when spot moves away from 100.00 on [...]

[Read more →]