Protective Forex Options
May 4, 2009 by admin · Leave a Comment
Frequently you will hear traders, especially on the institutional side, talk about hedging some of their market exposure on a particular position. Every good trader learns to minimize risk through hedges.
You can use forex options to reduce your total exposure to market risk. For example, if you are long a particular currency pair, and want to cover some of your risk without using a stop loss, you may decide to buy a bearish option (put). Likewise, if you are short a currency pair and want to hedge some risk, a long call can be used. In this section we will talk about why you might want to do that and how it works. {mos_fb_discuss: 26}
Buying a hedge or protective option is something that traders do when they think that risk is rising in a particular position, and they want some coverage against loss, but do not want to use a stop loss, which may whip them out of the position early. Read more about protective forex options…
