Remember George Soros; the one who had broken the British pound and brought the Bank of England to its knees in the early 90s. George Soros made cool $1 Billion profit in a matter of few days by betting on the fact that the British pound was overvalued and Bank of England could not sustain its price for long.
He decided to purchase $10 Billion of puts and calls options by using all their funds assets as collateral. George Soros was willing to gamble everything on a single bet.
George Soros had perfect knowledge of the currency markets. He was sure of his bet and had the conviction that the Bank of England could not prop the overpriced British pound for long. His conviction was shared by other currency speculators. The only difference between him and them was the huge amount of the bet he placed. Bank of England was forced in just of 24 hours to take the British pound out of the European Monetary System and let it float freely. His gamble had paid off.
The price of British pound plummeted. George Soros gamble had worked. The next day, his picture was in almost all the major newspaper with the caption: The Man who broke the Bank of England.
Currency markets are huge. Everyday roughly $3 trillion gets transacted in the forex markets. There are many methods, the traders can use for profiting from the volatility in the currency markets.
You as a retail forex trader can trade any one of these contracts: spot, futures and options. Two more contracts are traded in the currency markets primarily for hedging by large institutions like banks, corporations and hedge funds. These are forwards and swap contracts.
What are forex options? Options are derivative instruments that allow you to buy or sell an underlying asset at a price known as exercise price before or on a certain date called strike date. There is no obligation on you to actually buy/sell the currency like that in futures.
Currency is the underlying asset in forex options. You can purchase a forex options on payment of a certain premium. This is the price that you pay for getting the right but not the obligation to buy/sell a certain currency.
You may or may not exercise your right to buy/sell the currency. If the market price of the currency is above/below your strike price, you can buy/sell that currency by exercising your option.
However, in case, the currency market price is below/above the strike price of the forex options; you need not exercise your right to buy/sell. By not exercising the forex options contract, you only lose the premium.
If you want to try forex options then there is a very good forex options strategy that lets you profit regardless of the direction in which the currency market is moving.
This method is guaranteed to give you profits with an ROI of 30-50%. Try this method. It is risk free.
