Forex Questions

mellie asked:


I am planning to run an automated forex trading platform hosted on a server outside Singapore. Client’s trading platform will be hosted on the server and trades will be executed on their behalf. Do I need a license and how do I obtain the license?

forexsystemreviews asked:

forexreviews411.com Download a FREE copy of my 97 value forex trading system NOW at: forexreviews411.com

The forex options market started as an over-the-counter (OTC) financial vehicle for large banks, financial institutions and large international corporations to hedge against foreign currency exposure. Like the forex spot market, the forex options market is considered an “interbank” market. However, with the plethora of real-time financial data and forex option trading software available to most investors through the internet, today’s forex option market now includes an increasingly large number of individuals and corporations who are speculating and/or hedging foreign currency exposure via telephone or online forex trading platforms.

Forex option trading has emerged as an alternative investment vehicle for many traders and investors. As an investment tool, forex option trading provides both large and small investors with greater flexibility when determining the appropriate forex trading and hedging strategies to implement.

Most forex options trading is conducted via telephone as there are only a few forex brokers offering online forex option trading platforms.

Forex Option Defined – A forex option is a financial currency contract giving the forex option buyer the right, but not the obligation, to purchase or sell a specific forex spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the forex option buyer pays to the forex option seller for the forex option contract rights is called the forex option “premium.”

The Forex Option Buyer – The buyer, or holder, of a foreign currency option has the choice to either sell the foreign currency option contract prior to expiration, or he or she can choose to hold the foreign currency options contract until expiration and exercise his or her right to take a position in the underlying spot foreign currency. The act of exercising the foreign currency option and taking the subsequent underlying position in the foreign currency spot market is known as “assignment” or being “assigned” a spot position.

The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller up front when the foreign currency option is initially purchased. Once the premium is paid, the foreign currency option holder has no other financial obligation (no margin is required) until the foreign currency option is either offset or expires.

On the expiration date, the call buyer can exercise his or her right to buy the underlying foreign currency spot position at the foreign currency option’s strike price, and a put holder can exercise his or her right to sell the underlying foreign currency spot position at the foreign currency option’s strike price. Most foreign currency options are not exercised by the buyer, but instead are offset in the market before expiration.

Foreign currency options expires worthless if, at the time the foreign currency option expires, the strike price is “out-of-the-money.” In simplest terms, a foreign currency option is “out-of-the-money” if the underlying foreign currency spot price is lower than a foreign currency call option’s strike price, or the underlying foreign currency spot price is higher than a put option’s strike price. Once a foreign currency option has expired worthless, the foreign currency option contract itself expires and neither the buyer nor the seller have any further obligation to the other party.

The Forex Option Seller – The foreign currency option seller may also be called the “writer” or “grantor” of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take the opposite underlying foreign currency spot position if the buyer exercises his right. In return for the premium paid by the buyer, the seller assumes the risk of taking a possible adverse position at a later point in time in the foreign currency spot market.

Initially, the foreign currency option seller collects the premium paid by the foreign currency option buyer (the buyer’s funds will immediately be transferred into the seller’s foreign currency trading account). The foreign currency option seller must have the funds in his or her account to cover the initial margin requirement. If the markets move in a favorable direction for the seller, the seller will not have to post any more funds for his foreign currency options other than the initial margin requirement. However, if the markets move in an unfavorable direction for the foreign currency options seller, the seller may have to post additional funds to his or her foreign currency trading account to keep the balance in the foreign currency trading account above the maintenance margin requirement.

Just like the buyer, the foreign currency option seller has the choice to either offset (buy back) the foreign currency option contract in the options market prior to expiration, or the seller can choose to hold the foreign currency option contract until expiration. If the foreign currency options seller holds the contract until expiration, one of two scenarios will occur: (1) the seller will take the opposite underlying foreign currency spot position if the buyer exercises the option or (2) the seller will simply let the foreign currency option expire worthless (keeping the entire premium) if the strike price is out-of-the-money.

Please note that “puts” and “calls” are separate foreign currency options contracts and are NOT the opposite side of the same transaction. For every put buyer there is a put seller, and for every call buyer there is a call seller. The foreign currency options buyer pays a premium to the foreign currency options seller in every option transaction.

Forex Call Option – A foreign exchange call option gives the foreign exchange options buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option “premium.”

Please note that “puts” and “calls” are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

The Forex Put Option – A foreign exchange put option gives the foreign exchange options buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the foreign exchange option buyer pays to the foreign exchange option seller for the foreign exchange option contract rights is called the option “premium.”

Please note that “puts” and “calls” are separate foreign exchange options contracts and are NOT the opposite side of the same transaction. For every foreign exchange put buyer there is a foreign exchange put seller, and for every foreign exchange call buyer there is a foreign exchange call seller. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction.

Plain Vanilla Forex Options – Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic forex option contracts that are traded through an over-the-counter (OTC) forex options dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or a forex put option contract.

Exotic Forex Options – To understand what makes an exotic forex option “exotic,” you must first understand what makes a forex option “non-vanilla.” Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific’s investor’s needs by an exotic forex options broker, are generally not very liquid, if at all.

Intrinsic & Extrinsic Value – The price of an FX option is calculated into two separate parts, the intrinsic value and the extrinsic (time) value.

The intrinsic value of an FX option is defined as the difference between the strike price and the underlying FX spot contract rate (American Style Options) or the FX forward rate (European Style Options). The intrinsic value represents the actual value of the FX option if exercised. Please note that the intrinsic value must be zero (0) or above – if an FX option has no intrinsic value, then the FX option is simply referred to as having no (or zero) intrinsic value (the intrinsic value is never represented as a negative number). An FX option with no intrinsic value is considered “out-of-the-money,” an FX option having intrinsic value is considered “in-the-money,” and an FX option with a strike price at, or very close to, the underlying FX spot rate is considered “at-the-money.”

The extrinsic value of an FX option is commonly referred to as the “time” value and is defined as the value of an FX option beyond the intrinsic value. A number of factors contribute to the calculation of the extrinsic value including, but not limited to, the volatility of the two spot currencies involved, the time left until expiration, the riskless interest rate of both currencies, the spot price of both currencies and the strike price of the FX option. It is important to note that the extrinsic value of FX options erodes as its expiration nears. An FX option with 60 days left to expiration will be worth more than the same FX option that has only 30 days left to expiration. Because there is more time for the underlying FX spot price to possibly move in a favorable direction, FX options sellers demand (and FX options buyers are willing to pay) a larger premium for the extra amount of time.

Volatility – Volatility is considered the most important factor when pricing forex options and it measures movements in the price of the underlying. High volatility increases the probability that the forex option could expire in-the-money and increases the risk to the forex option seller who, in turn, can demand a larger premium. An increase in volatility causes an increase in the price of both call and put options.

Delta – The delta of a forex option is defined as the change in price of a forex option relative to a change in the underlying forex spot rate. A change in a forex option’s delta can be influenced by a change in the underlying forex spot rate, a change in volatility, a change in the riskless interest rate of the underlying spot currencies or simply by the passage of time (nearing of the expiration date).

The delta must always be calculated in a range of zero to one (0-1.0). Generally, the delta of a deep out-of-the-money forex option will be closer to zero, the delta of an at-the-money forex option will be near .5 (the probability of exercise is near 50%) and the delta of deep in-the-money forex options will be closer to 1.0. In simplest terms, the closer a forex option’s strike price is relative to the underlying spot forex rate, the higher the delta because it is more sensitive to a change in the underlying rate.

By: John Nobile

About the Author:

Using a foreign currency trading software can assist you in knowing the ins and outs of forex trade. For the unfamiliar, foreign currency trades are more popularly known as foreign exchange trading. It is where people from all over the world, banks, and corporations meet up to trade the world’s currencies.

Foreign currency trading software is a computer software that aid the trader in making trades in the market. Timing is the name of the game when it comes to this industry. It is the main factor that makes or breaks you, either making you a good profit or completely running you out of your money. Using this online forex trading software can be helpful in minimizing the risk of timing issues in your trades. If you are a novice to the foreign exchange market, it is helpful to seek the assistance of this kind of software.

How It Works

Online forex trading software is a program that makes use of algorithms to conduct technical analysis on trends. In other words, it does the technical part of thinking for you. It is essentially programmed to deduce when a good time to trade will be. Most of the time, they even tell you specifically when you should perform a trade or pull out of a trade.

An online forex trading software can even do everything for you, all you have to do is leave it running and it will conduct all the necessary trades you want. It also allows you to preprogram data, making your trades more personalized. You get to place in your preferences so it will know what to watch out for when doing forex trading. This software is designed to work by analyzing historical data and make its recommendations based on that.

Convenient to Use

Online forex trading software eliminates your need to consult multiple sources to get reliable data on prices. The good thing is that it is a one-time investment to get a software like this. Unlike paying signal providers for a single piece of information, you can use this software to trade for you and give you ample recommendations.

There are various online forex trading software available for you to use. You just need to make sure that the software you end up choosing will be reliable. Make some research before buying it. Get advice from friends or forums. It is essential that you have support when you need it. Using a foreign currency trading software should make things more convenient and not add to the difficulties of foreign exchange trading.

By: Francis Tayllor

About the Author:

Hello Kitty asked:


Hi, Everyone! I am a FX beginner.
I am now taking a FX online course, and learn how to trade without making too much risk (definitely day trade). Right now, I am practicing with a Demo account.

This online course is introducing us a website for our practice, which has a contract of 100,000 of the base currency . With my budget, for me to be qualify for this, i have to use a high leverage, I was hoping to use only a couple of thousand dollars to start with (like a mini account). I dont want to use a high leverage.

Do you know and recommend any reputable/reliable online websites which you have actually used, and where someone like me can start (with
smaller amount money ) ?

Thank you in advance.
I did not know that Anyone knows a site called Oanda ?

I could not find a mini account service at FXCM ..
Thank you very much for all your feedbacks.
I am still reading your posts, so please add more information if any. Thanks!
Oh, also.. What currency combinations do you recommend? I will be starting with USD as my base. I have practiced with my practice site, with Australian, New Zealand, Euro, & Pound.
Thank you so much for all your input.
I only can choose one best answer. ;-(

stream73834 asked:

forextrading.bestreviewed.Net You can get software to do automatic forex analysis for you and then make automatic trades for you, as well. The program is programmed by forex experts who know how to recognize forex trends. This allows the program to do it for you. It is called FAP Turbo and it has been working incredibly well for me over the past few months. As I say in the video, it nearly doubled my money in about 2 and a half months. (from 2200 to 4000 dollars). You should really check it out for yourself to see what its all about – just click the link at the top of the description to go to the FAP Turbo website. Hope you like it as much as I do! Take care!

When any trading program starts to gain popularity the question will arise about whether it works or not. Now with the incredible success of the Forex Auto Pilot created by Marcus Leary the same question has been leveled at this system.

In case you are unaware the Forex Auto Pilot System is one of the most famous automated trading systems available today. And because of its popularity there are plenty of customers around to get good feedback from.

Here are the bottom line facts; the system is not 100% successful, however no system is. And that is a point that is often over looked. Most people buy into a system expecting that every trade will be a successful trade. This is simply not possible. The important factor in evaluating any piece of trading software is does it win more money than it loses. That is what makes a system successful.

The good news is that the Forex autopilot isn’t a scam. It is legitimate software based trading system that has worked for many people who have used the product with satisfaction. The reality is that it will probably work well for you as well that is if you use it as it is intended to be used, which is a help to aid you in making better trading decision. It is not a magic black box that will spew out quid, bucks or yen without any effort on your part.

And that brings us to the two critical mistakes that people make with this system:

Mistake #1

They use it without understanding it. This is a tool, and just like any other tool it must be used properly in order to make it work. The system comes with instructions and they should be studied.

Mistake #2

Using it without understanding Forex essentials. Every career has a learning curve and the Forex is no difference. While this software can work for you with little or no prior experience that does not mean that you should avoid becoming educated. With education, comes knowledge and knowledge will only make you more profitable, even with Forex Autopilot in your corner.

By: Nigel Banks

About the Author:

Prawx asked:


What’s a decent forex broker which is not a seedy bucket shop but still not to high priced?

I want something that I can start off with with around $500 or so just so I can learn the ropes and make my little trades. I’ve read warnings about certain forex brokers which are unregulated bucket shops and aren’t insured properly either. But are there any decent forex brokers which don’t charge terribly high fees but still are decent?

-=747=- asked:


I’m just very confused about this because, if you are trading on Forex, where do your profits go? A bank account? And where is a good place you can learn what all the Forex Lingo is…

It’s really tough if you don’t know what the h3ll you are even looking at..HELP!
I know! LOL, you have to be a freaking insain computer wizard and a freaking master trader just to work Forex…