Strategy

Forex options trading, take advantage of politics and world wide economy in your trading strategy

Forex options trading, take advantage of politics and world wide economy in your trading strategy. Options are not limited to assets listed in the stock market, you can use options with forex trading.

In this economy, where the only direction Europe is headed is down, and despite it’s previous experience with a similar situation, America is stubbornly following, we can expect fluctuations as both race for small dips. We can see this battle of the giants by the ebb and flow of world wide market indexes, and a volatility VIX index that has found stability at higher levels.

Forex trading is highly dependent on politics, if you believe your government’s not doing the right thing in regards to the economy of your country, options is  a great way to Hedge your cash. Indeed, forex options have limited downside risk, that is limited to the premium of the contract, and unlimited profit, it’s a great way to safeguard you from a national recession.

Forex options offer the classic put and call options, as well as SPOT, which are extremely flexible options. SPOT, or single payment options trading, allows you to spell out a scenario, such as “EUR/USD will be at 1.30 in 12 days”, for which you’ll obtain a premium, and get paid out if the scenario takes place.

Many options traders enjoy the flexibility offered by SPOT trading, for bullish traders these days; in this bouncy downhill track of a recession we’re going down, it’s a safety net for when America will decide to cut loose from the European wagon’s decent.

Be careful as in SPOT comports the same time risks as options, even if you get to decide on the expiry dates yourself. Premiums for SPOT options are also higher than the typical options, it’s a considerable trade off.

Share

Use options to circumvent the short selling ban in Europe! Deep in the money puts!

In what regulators believe is a strategy to restore confidence through this jittery market, four contries’ financial stocks’ will have a ban on short selling. Backing this hypothesis is that short selling will help reduce the impact of rumors on panic selling, bringing down stocks, and profiting short sellers.

Thursday night, the European Securities Market Authority said Belgium, France, Italy and Spain would bring forth this ban,

However, some of us still want to profit from the ebb and flow of this market, even as it plunges. Options can help you either way the market goes, and you don’t need to be shorting.

Buying puts is a buyer’s way to profit from an asset’s bearish move; Deep in the money puts carry less risk than shorting the stock, as you only pay for the contract, which is often times a fraction of the cost.

This week I profited from buying puts on $RIM, $BAC, and $SPY. I made up to 200% profit per position for moves as little as 10% on the assets price, there again. These were not Deep in the money puts, but to minimize risk for a short seller not used to options, deep in the money puts are the safest way to start.

Alternatively, if you believe the stock will have a bullish movement, deep in the money calls is a safe way to bet on them.

Share

Market and trading news