Currency options trading offers traders a great advantage I times of high volatility which is the staying power – so long as your option comes in the money, before expiry you make money regardless of where prices spike in the interim…
The problem most traders have is not spotting market direction, its getting their market timing right with their trading signal so they don’t get stopped out. They know which way prices are going to go, get stopped out and then see the trend go right back in the direction they thought, pile up thousands in profits and their not in the trade!
This is the attraction of currency options – they allow you to ride out short term swings against you and stay with the trend.
While limited risk is attractive you need to keep one fact in mind 90% of options expire worthless and there is a right way and wrong way to do currency options trading lets look at the right way.
The Wrong Way to Trade Options
What most traders do is buy cheap at the money options away from their strike price with little time to expiry – this is simply most times going to lose you money – The option is cheap for a reason! The problem of course is time decay eats these options up quickly and the trader losses money.
These traders do it time and time again and think for small outlay they have huge profit and yes they do but the odds are not on their side
The Right Way
The right way to buy currency options is to do the exact opposite of the above and buy in the money or at the money options and then get plenty of time to expiry.
While the options don’t have as much profit potential as an out the money option, the odds or chances of success are far greater.
If currency options are used the right way, they can be a valuable risk control tool and can give you the comfort of limited risk in times of high volatility and allow you to ride out short term price swings
The above are simple tips but they will help you maximize your profits and increase your odds of success.