About Trading FOREX Options
Option trading on FOREX and Metals is a sophisticated and intuitive trading method that is available at ICM Brokers. Investors can use options to execute a number of trading strategies as well as limiting losses. At ICM Brokers, investors can only initiate long call or put positions. The investor can only sell an option if he/she wants to liquidate an existing open position.
OTC FOREX Options Offered at ICM Brokers
ICM Brokers offers Over the Counter (OTC) plain vanilla European style options on the below products:
| Symbol | Description | Option Type | Contract Size |
|---|---|---|---|
| EURUSD | Euro / US Dollar | Vanilla | EUR 100,000 |
| GBPUSD | British Pound / US Dollar | Vanilla | GBP 100,000 |
| USDJPY | US Dollar / Japanese Yen | Vanilla | US$ 100,000 |
| USDCHF | US Dollar / Swiss Franc | Vanilla | US$ 100,000 |
| USDCAD | US Dollar / Canadian Dollar | Vanilla | US$ 100,000 |
| AUDUSD | Australian Dollar / US Dollar | Vanilla | AUD 100,000 |
| EURAUD | Euro / Australian Dollar | Vanilla | EUR 100,000 |
| EURCAD | Euro / Canadian Dollar | Vanilla | EUR 100,000 |
| EURCHF | Euro / Swiss Franc | Vanilla | EUR 100,000 |
| EURGBP | Euro / British Pound | Vanilla | EUR 100,000 |
| EURJPY | Euro / Japanese Yen | Vanilla | EUR 100,000 |
| GBPCHF | British Pound / Swiss Franc | Vanilla | GBP 100,000 |
| GBPJPY | British Pound / Japanese Yen | Vanilla | GBP 100,000 |
| CHFJPY | Swiss Franc / Japanese Yen | Vanilla | CHF 100,000 |
| XAUUSD | Spot Gold / US Dollar | Vanilla | 100 oz. |
| XAGUSD | Spot Silver / US Dollar | Vanilla | 5,000 oz. |
Option Set-up
It is important that traders understand how a FOREX option trade works and how to benefit from a bullish or a bearish market as well as the outcomes at expiry. When trading an option, the below option parameter should be provided to the seller:
| Notional Amount | The specified amount of the underlying security |
|---|---|
| Currency Pair | The product that the client is interested to trade the option |
| Option Type | Call: An option contract that gives the holder the right but not the obligation to buy a certain quantity of an underlying at a specified price up to a specified date Put: An option contract that gives the holder the right but not the obligation to sell a certain quantity of an underlying at a specified price up to a specified date |
| European Style | The option can be exercised only at the maturity |
| New York Cut | (Exercised 10:00 A.M New York Time) |
| Strike Price | The specified price on an option contract that may be exercised at maturity, whereby the call option buyer can receive a buy position while the put option buyer can receive a sell position |
| Expiry Date | The date on which an option expires |
| Premium | The amount that the buyer of an option pays to purchase the option |
OTC FOREX Option Trade Example
Call Option
Investor buys a EURUSD Call option contract from ICM Brokers. The Option contract parameters being:
Notional Amount EUR 1.000,000
Currency Pair EURUSD
Option Type Call/Put
Strike Price 1.4300
Expiry Date 1 month
Premium $ 5,350
- On Expiry Date -
- If the spot market is above 1.4300 at maturity, the option will be exercised and investor will have a buy position of Euro 1 Mio against USD at 1.4300
- If the spot market be at or below 1.4300, the option will expire worthless
Put Option
Investor buys a EURUSD Put option contract from ICM Brokers. The option contract parameters are same as table above:
- On Expiry Date -
- If the spot market is below 1.4300, the option will be exercised and investor will have a short position of Euro 1 Mio against USD at 1.4300
- If the spot market be at or above 1.4300, the option will expire worthless