How do forex options affect forex market?
Posted by Fx247 on 3 July, 2008
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This item was filled under [ Forex ]
Typically, what happens is you will be given the difference between the strike price and the current market price, as clearly the Writer of the Option can not physically deliver a curreny pair at an older, lesser price than the market. So they owe to indemnify you, or place in you in a financial position similar to that as if you have the currency pair at the current market value.
Now as for option contracts, You do not need to exercise them if they are about to expire. That would make no sense, as if they are ‘out-the-money’ you would lose money. A contract can expire, leaving you out the contract’s premium.
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