Are you looking for a new way of trading? Look no further. FX Options, a trading instrument available in EEA and in other countries too, offered by top brokers like IQ option, is an exciting way of trading popular currency pairs based on the Black-Scholes formula to calculate option value. Read the full article below to discover this new way of trading and see how you can earn huge profits while only risking the loss of the initial investment.
Why trade FX Options?
Unlimited winnings are possible through FX Options since there is no cap on the upside. This is quite interesting since traders can only lose a pre-specified amount but the amount that can be won is infinite. In addition, traders can cut their losses before the expiry time and thus, manage the risk by not losing all their investment in one sitting.
In other words, traders get a chance to have long-term success with FX Options since this instrument allows traders to sell the option before it expires while at the same time offers unlimited potential net profits.
How to trade FX Options?
This step by step guide includes all the required actions so that traders can understand what needs to be done to benefit from this exciting new instrument offered by IQ option.
To start with, traders can select 1 of the 5 of the most popular currency pairs available at the moment. There is a plan to have more added in the future. Then, decide on the amount that they wish to invest and choose a strike price, as shown in the figure below, according to their preference so that they find a balance between the risk involved and the profitability.
It goes without saying that the higher the risk involved the higher the profit. For instance, a strike price that is closer to the current price will not bring huge earnings since the jump is so minimal. In addition, traders should take into account that for the options offered they pay a small price fee which needs to be exceeded before they actually start winning and making real money.
This can be seen from the figure below that displays the percentage of the profit or loss that can occur at the exchange moment when the hourly interval expires. Traders can open a position at any time within the hourly interval even though the strike prices may change depending on the time left.
Traders will need to choose a put option, as shown in the figure above, if they believe that the price will go higher or a short option if they believe that the price will go lower than the current price. This is pretty clear as can be seen from the big green and red boxes above. Depending on the selection, the background color changes too. It goes green in the area that the strike price needs to go and red for the area below. Traders can even see what the percentage of other traders are doing in the left of their screen as shown in the figure below.
Now is the time to wait for the expiration time but this does not mean that traders cannot close their position before the time ends. As already explained, traders can cut their losses if they see that the trend goes against their option. On the other hand, if the trend favors their option, then they can sit back and see their earnings getting multiplied.
Last but not least, traders should educate themselves and practice with a demo account before they start risking their own funds. IQ option offers a free demo account, so you can start practicing FX Options today. Once you feel confident about it you can start using real money and benefit from unlimited potential earnings.Your capital is at risk