Donald Michael A778 Miller#55

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What are forex options and why are they used?

Forex options give traders the right, but not the obligation, to buy (call) or sell (put) a currency at a specified strike price before expiration. Institutions use them to hedge exposure, speculate on volatility, or construct complex payoff structures. Example: a company importing from Japan may buy USD/JPY calls to protect against yen appreciation. Benefits: risk is limited to the option premium, while potential gains can be large. Risks: premiums can be costly, and time decay erodes value. Retail traders can access simplified options via brokers, though liquidity varies. Options expand strategies beyond directional trading—allowing profit from volatility, hedging, or range-bound markets.