Currency options
Posted by Santu amin in FOREX
What is commonly known as a Forex option is a contract which allows a person the right to buy or sell an item of their choosing at a given price for a limited period of time, however is does not oblige them to do so. The only person obliged to perform anything is the seller of the option.
In other words, the person who is buying a currency option retains the option, without being obliged, to buy (known as a "call") or sell (known as a put) any amount of a given currency for a different currency at a negotiated price and date. The buyer is always responsible for paying the cost of buying the option, known as a 'premium' to the seller. The price of the premium is determined by the seller and is commonly based on nominated delivery, current rates, the determined strike rate, expiry dates, and option style.
The seller gives his terms and then it is the buyers decision as to whether or not to go through with a deal; If a buyer does accept then the seller is clearly obliged to follow through with the deal.
