Tuesday, November 4, 2014

Trading Options on MT4

More info: http://ift.tt/1snehGK Options are financial contracts They give the buyer the right to buy (CALL options) or sell (PUT options) FX at a fixed price (the strike price) at a fixed date (the expiry date) in the future These contracts are bought at a PREMIUM The premium fluctuates in value just like any other financial instrument and can be bought and sold for profit Why would you use options? Forex Options can be used for two very distinct objectives: Speculation – use Forex Options to profit based on your view of future price movements. Protect /Hedging – use Forex Options to reduce the risks associated with the risk arising from future price movements. How do I trade options on MT4? Trading options on MT4 is simple. To start, simply login to your MT4 Account that is installed on your desktop. Next, right click on your market watch screen and select Symbols, then click on OOptions. From there you select your desired currency pair. You can trade (EUR/USD, AUD/USD, GBP/USD, USD/JPY, USD/CHF, XAU/USD). These pairs are available with different expiration times and strike prices. As soon as you have all your preferred symbols loaded in your account market watch, you can start trading immediately. If you hover over a symbol in the Market Watch, it will give you the full description of the option. The description will inform you of the option type, strike, expiry and profit calculation. When reading the symbol the first letter will be a P or C for Put or Call respectively. When you trade them ? You buy put if you expect the market to move lower and you buy call if you expect the market to move upwards. The second character will be# (hashtag). The next six letters represent the underlying asset of the option such as the currency pair. The ninth letter is the expiry or duration of the trade indicating the time of expiry which is either one day represented as a (d) or week which is represented as a (w). 1-day expiry takes place daily at 2PM GMT. Weekly expiry takes place every Friday at the same time. The last symbol or number indicates the different strike prices we have available. What is the strike? The exercise or strike price – the exchange rate at which the foreign currency can be purchased (call) or (put). A +2 means the strike price is 100 pips above the current market price, 0 means the current market price or “at the money” and -2 is minus 100 pips. Next, we let’s open an option deal. For our first example we will trade a call option on EUR/USD with a one week expiration time which means we expect the EUR to gain value before the expiration date. The symbol for this option is C#EURUSDW+2: c, meaning a call option, eur/usd which is the underlying asset, w meaning a 1-week expiry and +2 meaning the strike price is 100 pips above the current market value. Now, set your desired contract size. For this example we will trade 1 Lot, the next step is to set a stop loss to manage your risk. We will set a 100 pip stop loss. If desired you can also set a take profit rate as well. Next, simply click “Buy” and the option will appear in your mt4 terminal with all your forex trades. Remember that with Mt4 Options you can close your option at any time even before the expiration day and there are no swap charges.

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