Forex option trading is an agreement or arrangement that allows the holder a right to buy and sell a currency during a particular period in time, despite not being instructed to do so. We have two types of forex option trading - the put options and the call options.
Call option grants the holder the power to buy the currency while the put option grants the holder the power to sell the currency. Although, we still have different kinds of options available and being used by firms that transact international trade to minimize the potential for loss inherent in forex rate fluctuation.
When it all started, forex options trading were available to big banks, multinational corporations and financial institutions to leverage the forex exposure. Latest technological innovations are able to provide us with real-time quotes for the market, making options trading readily available to private investors and corporations as well. We can now see trades being sealed over the phone or over chat platforms.
The flexibility of trading that forex options trading provides small as well as large investors is enormous. Being able to hedge funds is a big merit that an investor can put to use in the forex arena. It's a bit different here because most of the options trading are communicated via phone calls and very few forex options trading that are provided online.
I'll explain some of the demerits of forex options trading which is detrimental to an investor's equity: