This article attempts to set out the basic features that you will need to know in order to learn options trading. By the time you finish this article, you should understand what an option is, how they work and how you could potentially incorporate this into your overall trading strategy.

Back to basics

An option is a contract between the buyer (the “holder”) and the seller (the “writer”) that gives the holder the right, but not the obligation, to:

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Forex options trading is one type of transaction done in the world of foreign currency trading. In line with this, several option styles are employed in forex trading. The four option styles are the European option (an option which is exercised only during the expiry date), the American style (an option exercised on any trading day as long as it is before the expiry date), the Barrier option (wherein price of the option must reach trigger level before it can be exercised) and the Bermudan option (option which can only be exercised on a specific date on or before the expiry date).

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ou, nuts?! You want me to risk part of my savings trading options? This whole covered calls idea sounds like just another one of those crazy options strategies that sound great, but don’t deliver in the end.”

My pal was a normally a mild-mannered sort – very reflective, always weighing the consequences rationally before acting. In short, a logical thinker.

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