The best forex brokers can be split into two categories: forex brokers that offer online forex option trading platforms, and forex brokers that only allow traders to trade via telephone through a broker/dealing desk. Some forex option brokers also offer live forex option brokerage and online forex option trading.
Different forex brokers have different trading account minimums. They can vary from a few hundred dollars to well over fifty thousand. A forex option broker may require traders to trade forex options contracts of minimum nominal values (contracts sizes) not exceeding $500,000. Some types of options contracts, such as those offered by forex brokers, can only be entered and exited at will. However, other options contracts, like the ones that are locked in until settlement or expiration, cannot be reopened. Depending on what type of forex option contracts you sign, you could be stuck in the wrong place with an option agreement that you can’t trade out of. Before trading, investors should talk to their forex option broker about the minimum trading account, minimum contract size, and contract liquidity.
Forex option brokers can offer investors a wide range of forex option trading products. The risk characteristics for each of the forex option products listed below are very different and should be understood by investors.
Plain Vanilla Forex Options Broker. Plain vanilla options usually refer to standard call and put option contracts traded through a exchange. However, for forex option trading, it would refer to standard, generic options contracts that are trade through an OTC forex dealer (clearinghouse) or forex dealer. Vanilla forex options could be described in simplest terms as the buying and selling of a standard forex option contract or forex puts option contract.
Only a few forex broker/dealers offer simple vanilla forex options online with real time streaming quotes 24 hrs a day. Most banks and forex brokers only offer forex options over the phone. Vanilla forex options in major currencies have great liquidity. You can enter the market short or long and exit at any time of day or night.
Vanilla forex option contract can be used together and/or with spot Forex contracts to form a base strategy such as writing covered calls or more complex forex trading techniques such as butterflies strangles ratio spreads synthetics, strangles, and butterflies. Of course, vanilla options are the base of many exotic options forex option trading strategies.