Both the foreign exchange call options and forex put options deal with currency options.
Forex call options and forex pull options basically works or operate on the same principle wherein the forex option buyer is given the right but has no responsibility to buy a certain underlying forex spot at a precise strike price before the option expires or on the expiration date itself. The amount paid by the foreign options purchaser to the foreign exchange options seller is what is known as premium. However, it should be noted that the contracts existing in a put option and call option are different and independent of each other and not opposite contracts in the same foreign exchange transaction.There is forex put seller for every forex put buyer and the same is true with call options - there is a forex call option seller for each forex call purchaser; and both buyers pay an amount - the premium- to their sellers whenever a foreign exchange transaction occurs.
There are two possible circumstances that will happen if the forex options seller decides to hold onto the contract until the day of expiration:
1. The spot position that the seller will take will be the opposite underlying forex currency option spot position if the buyer choose to implement the option.
2. The seller can just keep the whole amount of the premium and just let the forex currency option expire worthless if the price is OTM strike price.
In all transactions, the bottom line is, the outcome of the transaction depends on the positions taken by the buyer and the seller.
Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com - He has helped hundreds of people on Trading Forex with Options.
He has recently developed a free e-course showing you a step by step process for starting your Forex Trading easier. To learn how to start Forex Trading with Options without wasting your time and losing more money, visit http://www.NonDirectionTrading.com/members/FreeReport.htm
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