Currency Options – A Simple Strategy For Consistent Profits
Usually currency or forex options offer you unlimited profits with limited risks, which is a good thing except that there is a 90% chance that the options will expire and become worthless. But despite the risk, which a lot of forex traders are afraid of, there is still a chance that an options seller will become successful. This article aims to understand currency options strategies in which your chances of succeeding will become maximized when selling options premium.
So if the chances of success are great, why are forex traders hesitant when selling options? It all sums up to one word – risk. There’s just too much risk when selling options because of two things: 1) you need to have a large capital and to ride out the losses in case you do face some, and 2) you also need to have enough money to be able to trade a diversified portfolio of options. Therefore, let’s look at how one can maximize gains when selling forex options:
1. Sell Greed, Buy Fear
Option premiums usually become high when a market is driven by greed or fear. These markets are usually the ones that provide the best profit potential. There are two indicators that will help you in this:
· First, look for markets that have bullish tendencies. You can check the % bullish indicators and look for 15% readings and above 85% to isolate opportunities.
· Next, you can look for bull markets being sold via net traders in the Commitment of Traders Report.
2. Get Time on your Side
When you are buying option premiums you want time on your side, but when selling them you’d want the complete opposite. The major factor that will determine an option’s value is the expiration of the option, therefore use it to your advantage and sell forex options close to expiry.
