Most of the forex trading strategies depend on predicting the direction of the market and the trade market direction. For example, you must determine whether the market is trending up or down. If the market is trending, you will live long in the direction of the market and when the market is trending down, you go short. This is how it works. Let’s discuss in this article a currency options trading strategy that is not dependent on market direction. No matter in which direction the market to currency options trading strategy profit for you.
You might have heard about put and call options? Put options give you the right to sell a security or a currency pair at a certain price by a certain date. On the other hand, gives a call option the right to buy a security or a currency pair at a certain price by a certain date.
Now, currency options are an alternative method of trading in the forex market. Many traders simply trade the spot market, but let’s say you think that EURUSD will move significantly, but you are not sure in which direction. This can happen at the time of the release of the NFP report. Anyway, I, I have this strong feeling that the EURUSD pair is about to make a big move in the market, but you are not sure about the direction of the move or it will be up or down.
You buy a put option on EURUSD and a call option on EURUSD with the same strike price and the same expiration date. This option trading strategy called a straddle. You form a straddle by buying put and call options with the same strike price and the same expiration date. Now, if the currency pair EURUSD makes a big step in the market, regardless of the direction, make your profit. But this strategy will fail if the move was not great and it was only small.
Similarly, you can strangle, which is to form less expensive than the straddle. You buy a put and a call option contract with the same expiration date but different strike prices. Also this strangle will make a good profit for you if there is a large movement in the EURUSD market.