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Have you heard about George Soros; The legendary manager of Quantum Hedge Fund who had made a cool $1 Billion profit from a single bet. In the early 1990s, one day he was sitting in his office discussing currency markets with his associate. Both of them were of the opinion that the British pound was overpriced and Bank of England could not sustain its price for long.
Acting on his hunch, he told his associate to purchase $10 Billion put and call options on British Pound and German Mark. It was a huge bet. He was in fact swaggering all the assets under his control on a single bet that may or may not pay off.
He was convinced that the Bank of England cannot sustain the overpriced British pound. In a short time, other speculators also joined action. There was a huge selling pressure on British pound. In a matter of just 24 hours, Bank of England had to take British pound out of the European Monetary System and let it float freely.
British pound plummeted in the currency markets. George Soros had won his bet. He became famous as the man who broke the British pound with his pictures in all the famous newspapers and magazines.
Forex markets are huge. There are many ways to profit from the volatility in the forex markets. A number of trading vehicles are available for you to try in the forex markets.
Spot, futures and options are three contracts that are traded on centralized exchanges and available to you as a retail forex trader. Swaps and Forwards are two more contracts traded in forex markets for hedging by large institutions like big banks, multinational corporations and off course hedge funds.
Options are derivative contracts that let you buy or sell an underlying asset at a price called exercise price before a certain date known as the strike date. Unlike futures, you dont have the obligation to actually buy/sell the currency.
Currency is the underlying asset in forex options. You can purchase a forex options on payment of a certain premium. This is the price that you pay for getting the right but not the obligation to buy/sell a certain currency.
You may or may not exercise your right to buy/sell the currency. If the market price of the currency is above/below your strike price, you can buy/sell that currency by exercising your option.
If the currency market price is below/above the strike price of the forex options contract that you had purchased by paying a small premium; you can simply let the options contract expire. You only lose the premium.
There is a very good Non Directional Forex Options Trading Strategy that does not depend on the direction of the market. In other words you dont need to predict whether the currency price is going to go up or down and make your profit regardless.
This is a risk free method but it only guarantees 30-50% ROI. If you are satisfied with this much sure shot return you can try this method.
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