Veteran traders always compare the forex with aggressive speculation. Most of the time this is about the ability of the forex retail trader to trade options on the currency pairs. Your strategies and tactics will be enhanced using OTC options.
What most traders will be doing is buying calls or puts on the underlying spot currency pair. With this strategy the risk is limited to the premium paid. With options on spot forex pairs you can get a chance to have more income.
Risks can be lessened in forex trading. Remember these tips in formulating an income strategy for a forex account using options. The first one is to make some income goals.
At the same time the main objective here will need for you to have an achievable dollar goal. Setting an objective of $1,000 per month on a $5,000 account is a different level of risk than setting a goal of $500 per month.
Be sure to have risk controls and manage the trade. Making a process will help you lessen your risk. You can use some Stop and limit orders to lessen it.
Another risk management tactic you can use is buying and selling spot cash to offset price moves can be applied. Most people would advice that you take measures to control the downside of this tactic.
You might as well want to use technical analysis. Trading requires a degree of understanding how the strike prices relate to overall key indicators, trends, and support and resistance levels. Remember that the trader itself should be an outcome of technical analysis.
Traders also need to remember these evaluating levels like Fibonacci levels, point and figure breakout zones, as well as the valuations on the delta, theta and other key terms related to options trading.
After you have determined your monetary goals, you can scan option pricing tables for puts and calls that can help you achieve those goals. Use the internet as there a plenty of 24 hour OTC currency option pricing tables.
There is this one incident when in looking to generate income using EUR USD options, they chose a February 98.50 put and a February 110.05 call where the spot price at the time of the trade.
It is noticeable that in this case the margin ratio is 80% which is high. It is best to use buy stops if you do this trade with a $5,000 account.
Your objective is that when the February options expire, the cash price of EURUSD will be between 98.50 and 110.05.
In currency trading one can choose to use a 400 pip wide trading range.