Foreign exchange option trading is a transaction in which the parties to the transaction trade in the future for a specified period of time, in accordance with agreed terms and a certain exchange rate, on whether to purchase or sell certain foreign exchange options in the future. Foreign exchange option trading is a kind of financial innovation in the early and mid 1980s, and it is a new method of foreign exchange risk management.
one: transaction characteristics
1. Whether it is a contract for performing foreign exchange transactions or a contract for abandoning foreign exchange transactions, the option transaction fees paid by the foreign exchange option buyer cannot be recovered.
2. The agreed exchange rates for foreign exchange options trading are quoted in US.
3. Forex options trading generally adopts a design contract.
4. The rights and obligations of buyers and sellers of foreign exchange option trading are not equal, that is, the buyer of the option has the right to choose, and the seller of the option bears the right to be selected and cannot refuse to accept.
5. The gains and risks of buyers and sellers of foreign exchange option trading are asymmetric. For the buyer of the option, the cost is fixed and the income is unlimited; for the seller of the option, the maximum benefit is the option fee. The loss is unlimited.
II: Trading role
Forex buyer, the main function of the foreign exchange option is to enhance the flexibility of the transaction by purchasing options, that is, to have the right to choose the exchange rate for foreign exchange, to eliminate the loss caused by exchange rate changes, to seek The gains from exchange rate changes.
1. For customers with foreign exchange receipts and payments, they can both profit and avoid losses in exchange rate changes.
2, can control the loss of speculation mistakes.
III: Types of Forex Options Trading
According to the characteristics of foreign exchange trading and options trading, foreign exchange options trading can be divided into spot exchange options trading and foreign exchange futures options trading.
The option exchange (optionsonspotexchange) means that the option buyer has the right to purchase a certain amount of certain foreign exchange spot at the agreed exchange rate on or before the option expiration date, called a purchase option (calloption), or sell a certain number of certain A kind of foreign exchange spot, called the purchase option (putoption).
Forex futures option trading means that the option buyer has the right to purchase or sell a certain amount of certain foreign exchange futures at the agreed exchange rate on or before the maturity date, that is, buying the extended purchase option allows the option buyer to obtain foreign exchange at the agreed price. The long position of futures; buying a sell option allows the option seller to establish a short position in the foreign exchange futures at the agreed price.
Classification: Options can be divided into two categories according to the time limit for exercising power: European options and American options.
IV: Basic knowledge of foreign exchange options trading
1. Parity, discount and premium options
Parity options refer to options with the same price as the real-time price of personal foreign exchange trading. A discount option is a call option that performs a price higher than the real-time price of a person's foreign exchange trading, or a put option whose price is lower than the real-time price of a person's foreign exchange trading. A premium option is a call option that performs a price that is lower than the real-time price of a person's foreign exchange trading, or a put option that performs a price that is higher than the real-time price of a person's foreign exchange.
2. Execution price
refers to the foreign exchange trading transaction price of the personal foreign exchange option when the customer chooses to execute the foreign exchange option.
3. Reference price
refers to the basis for judging whether the customer executes the option. It refers to the international foreign exchange price at 14:00 pm of the option expiration date. The reuters quotation system TKFE, AUDH= and CADH=page code are quoted in each currency. Middle price.