If you're into speculation on currencies, and have some risk capital at hand, consider currency options traded on the Philadelphia Stock Exchange. These are contracts that rise and fall with the value of major currencies. The contracts are available through your broker, as long as you are approved for option trading.
Remember that currency options are highly leveraged, meaning you can use a little money to gain -- or lose -- a lot more. Among these are options on the Australian dollar, British pound, Canadian dollar, Japanese yen, Swiss franc, New Zealand dollar, and the euro, a cross-border currency used in several European nations. When you're trading currency options, you're trading a legal and enforceable contract to buy or sell a fixed amount of foreign currency.
For example, the Australian contract -- symbol XDA -- represents 10, Australian dollars; the price of the contract is the amount of U. You can buy the contract if you believe the Australian currency and the contract will rise in value against the dollar; or "short" -- sell -- the contract if you believe the Australian currency will fall against the dollar. Options aren't forever -- in fact, they last only a few months. Every contract carries an expiration month; the contract expires on the third Friday of the month.
At any time before expiration, you can close the trade by either buying or selling it and complete a "round trip. If you're underwater on the contract, and the trade is still open on expiration, your broker will close the trade on the expiration date at a loss. If the contract is quoted at 5. You can buy a single contract or multiple contracts, but as long as the contract is open, you run the risk of a loss if the currency moves against you.
Options deliver no interest or dividends and carry no guarantee from your broker or any federal agency. If you trade currency options, to avoid a big loss, use stop-loss orders that will close your trade at a preset level.
Holding a bachelor's degree from Yale, Streissguth has published more than works of history, biography, current affairs and geography for young readers. The OMX exchange offers currency as well as stock options. Currency Options When you're trading currency options, you're trading a legal and enforceable contract to buy or sell a fixed amount of foreign currency. Expiration Dates Options aren't forever -- in fact, they last only a few months.
FX Options Product Specifications. The Advantages of Currency Options. How to Invest in Brent Crude Euro vs. More Articles You'll Love. Rules for Buying Stock Options. How to Invest in Brent Crude. How to Trade Leveraged Stock Options. Taxation of Covered Calls. Tax Treatment of Selling Put Options. What Is an Expired Option?More...