Bearing this in mind, I went asking around available in the market what forex currency trading strategies option dealers have realized the most profitable.
Before we get on top of the nitty gritty of the models, remember one of several fundamental rules of trading – it doesn’t matter how much money you’ve made, it is possible to lose much more of it and much faster.
So what are these strategies? Let us list people who have been mentioned most often:
Calendar spreads. The public holidays spread through the calendar have quantifiable effects on forex trading strategies, and so on calendar option strategies particularly. Many non-working days through the festivities accelerate some time decay of options and it is possible to employ this to your advantage
Forex binary options. The CME Group provides extensive information about currency trading strategies for individual (instead of institutional) forex options traders. Traders have been investigating items like Swiss CPI, German Factory Order and also other economic data that you’ll be able to bet around with binary options
Risk reversals are proving to be very popular too around currencies that may be influenced by large cross-border mergers and acquisitions activity.
For those who might be confused with the terminology, risk reversals are an option combination composed by the acquiring a trip option as well as the sale of an put option (or vice versa). This is generally prepared for zero cost. One curiosity: some people wonder why they may be called “risk reversals”. This is because if you are holding the structure round the middle of the 2 strikes your gamma position switches signs in a short time.
Say you’re long the phone call, short the put. As the market rises you are going to in a short time find your situation switching from negative gamma (from the sold put) into positive gamma (from your bought call). Hence the name “risk reversal”.
All in every, the main theme for forex option strategies definitely seems to be relative value plays around different markets as well as dates (calendar spreads). Few traders appear to be implementing currency trading strategies with a clear directional view on currency rates.