 Ikon Group is a market maker in OTC FX and Bullion options market. The firm’s truly unique trading platform, Ikon Prime Platform (Options Trading), delivers streaming two-way quotes on vanilla and “standard” exotic options; such as Knock-outs and Knock-ins.
Ikon Prime Platform (Options Trading) is able to give our clients the same access to options as they have in the spot market. With no more negotiated pricing, start auto-executing options with Ikon Group, today!
Call Option
A call option gives the buyer the right to buy (go long) a spot currency pair at a specific price on an expiration date. For example, a Eu/USD 1.25 call option expiring on September 15th gives the buyer the right to buy or go long spot EU/USD at 1.25 on September 15th. Even if spot EU/USD goes well past 1.25, the option buyer retains the right to own the underlying spot position at 1.25 on the expiry date. Of course, the option buyer may close the option prior to the expiration.
Put Option
A buyer of a put option has the right to sell (go short) a spot currency pair at a specific price on the expiration date. For example, a Eu/USD 1.20 put option gives the put buyer the right to sell EU/USD at 1.20 on the expiry date of the option. Should spot EU/USD go well below 1.20, the put holder (buyer) still retains the right to go short at 1.20.
Trader Types
Option Buyer
The buyer, or holder, of an option can choose to exercise his right and take a position in the underlying spot currency. On the expiration date, the call buyer can exercise his right to buy the underlying spot position and the put holder can exercise his right to sell the underlying spot position. Should the buyer choose to exercise his rights on expiration, he will be assigned a spot position equivalent to the strike price and notional amount. In most cases though, the option buyer does not exercise, but instead offsets the option in the market before expiration, if it has any value.
Option Seller
Option sellers (i.e., those who sell options that they didn’t previously own) are also called option writers or grantors. The seller could be a trader or hedger and is contractually obligated to take the opposite spot position if the buyer exercises his right. In return for the premium, the seller assumes the risk of taking a possibly adverse spot position. Puts and calls are separate option contracts; they are not the opposite side of the same transaction. For every put buyer there is a put seller, and for every call buyer there is a call seller. The option buyer pays a premium to the seller in every transaction.
Options are often thought of as difficult to learn –requiring numerical ability beyond most people. Actually, options are not difficult to understand once the basic vocabulary is mastered. Only the very advanced options concepts and strategies require any complex mathematics. 1 |
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