Is there any Relation between spot currency market (forex) and option currency market
the OTC FX option market is derived from spot FX, so of course there is the traditional derivative/underlying relationship there. I am not familiar with the extent to which retail traders have access to the OTC FX option market, but institutions trade it very heavily. Most FX options volume occurs OTC rather than via exchange-traded options on futures (CME). Having said that, trading volume for options on currency futures at the CME is growing, due in part to entry by electronic options market makers from other asset classes, primarily equities. They have greatly increased liquidity, making options prices more attractive. Futures liquidity is also high, which facilitates option pricing and delta hedging.
I’m trading in spot forex market right now, small account ofcourse, because I’m at the beginning, but I will like to know more and mabe there can be designed some kind of money management wich include options and futures based on the same equity, like EURUSD, for example, in order to reduce the risk. I just think this is some sort of sofisticated investment.
Thanks for the answer!
There are a number of brokers which offer forex option trading. Check out SAXO Bank (Copenhagen), TradeStation Securities (USA) and Interactive Brokers (USA) for starters.
Thanks for the information! Saxo Bank’s offering in particular looks very sophisticated. Visiting TradeStation’s website, I had trouble finding the FX options area specifically–they offer Forex, and they offer Options, but Forex Options? Maybe I wasn’t persistent enough. Their platform looks pretty awesome, though. Worth checking out for sure.
One thing to keep in mind is implementation of Dodd-Frank. Here in the USA, FX options and NDFs will have to trade on a SEF (Swap Execution Facility) with CCP in order to be in compliance with Dodd-Frank. I don’t know whether any of these firms qualify as a SEF, so the future for retail Forex option trading may be a bit murky until the dust settles on various regulatory definitions.
Yes, Dodd-Frank is a problem. SAXO does not offer retail accounts to US residents, so you have to go in as a corporate or institutional account, which has its own set of issues. TradeStation is first-class, although there are costs associated with their platform and add-on services. I apologize for my error. Forex Options are not currently offered by TradeStation Securities (at least to US residents). The platform IS awesome; truly professional in every respect.
I think the simplest implementation would be to trade FXE options which are listed on the major US option exchanges. FXE is the euro ETF which trades over 1,400,000 shares a day. There is enough open interest to allow you to pursue some simple strategies. As long as your account is set up for listed option trading, you can trade FXE
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