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TRADING STRATEGIES
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Investors have more choice and flexibility to hedge their currency exposure risk. FX Options allow the same core trading and hedging strategies used with options on stocks, ETFs and Indexes. A simple way to remember what type of option you need to buy is to focus on the base currency, which is the first currency in a currency pair. The second currency is the quote currency (counter-currency). Options prices are derived from the base currency relative to the quote currency.
The USD-based (per US $) is available for all ten pairs. For example, if you expect the dollar to strengthen against the yen - you buy YUK calls. If you expect the dollar to weaken against the yen - you buy YUK puts. In the "in US $" (inverse) convention, if you expect the euro to strengthen against the dollar, you buy EUU calls. If you are expecting the euro to weaken against the dollar, you buy EUU puts. |
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Option buying for directional ideas |
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Option buying for genuine hedgers |
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Credit spreads for income |
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Spreads for genuine hedgers |
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