Kinds of the Forex: Options Market.

Options Market. A currency option is a contract between a buyer and a seller that gives the
buyer the right, but not the obligation, to trade a specific amount of currency at a predetermined price and
within a predetermined period of time, regardless of the market price of the currency; and gives the
seller, or writer, the obligation to deliver the currency under the predetermined terms, if and when the
buyer wants to exercise the option.
More factors affect the option price relative to the prices of other foreign currency instruments. Unlike
spot or forwards, both high and low volatility may generate a profit in the options market.
Trading an option on currency futures will entitle the buyer to the right, but not the obligation,
to take physical possession of the currency future. Unlike the currency futures, buying currency
options does not require an initiation margin. The option premium, or price, paid by the buyer to the
seller, or writer, reflects the buyer's total risk.