Trading Forex Options and Options On Currency ETFs

(I-Newswire) March 21, 2010 - The foreign exchange market is much larger than then equity markets although unlike equity (stock) options the currency option market is mainly Over The Counter (OTC). A global futures broker such as Enfinium International provides access to options on currency futures. However if your broker doesn’t support futures or options on futures you can still gain derivative exposure by trading options on currency exchange traded funds (ETFs), such as issued by Rydex CurrencyShares.

For example, if one wanted to take a bearish position on the AUD relative to the USD, then you could to do so via an Australian Dollar CurrencyShare ETF which trades with ticker code FXA. The CurrencyShares Australian Dollar Trust is designed to track the price of the Australian Dollar net of Trust expenses, which are expected to be paid from interest earned on the deposited Australian Dollars. www.etffunds.com.au provides a complete list of forex ETFs.

Various bearish strategies are:-

1. Short the underlying
2. Long put
3. Bear call spread
4. Bear put spread
5. Ratio put spread
6. Put time spread

The basic component of most bearish options strategies are put options. Put options changed the way traders profit when a stock goes down as there is no need to sell short, which resulted in a margin requirement. Previously, profiting when a stock dropped in price only happened when you short sold the stock itself. When shorting, margin is held to cover any potential risk with an adverse price move.

In summary currency ETFs are used to gain exposure to the world’s largest financial market – the forex market. If a trader is looking to take a speculative or hedged position on a currency, one can do so using a currency ETF.

About ETF Funds:
ETFFunds.com.au is a website dedicated to exchange traded funds. Whether you're an individual investor interested in learning about ETFs or a financial advisor using ETFs, the ETF Fund website will have the answer.

Company Contact Information
ETF Funds
Antony Goddard
Level 29 Chifley Tower
Sydney
2000
Phone : +61 2 9220 3579