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How To Install Metatrader 5 Custom Indicators May 9, 2022
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Foreign Exchange Option

Mira Team by Mira Team
December 29, 2020
in Forex Terms
Reading Time: 1 min read
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Definition – What does Foreign Exchange Option mean?

A forex option is a financial contract that gives the owner the right to exchange one currency for another at an agreed upon exchange rate and specific date. The owner of the option is not obligated to use (exercise) the option.

A foreign exchange option is also referred to as a fx option, forex option or currency option.

ForexTerms explains Foreign Exchange Option

Forex options are used by investors, traders, banks, businesses and so on. Some market participants use them to hedge against currency risk and others use them purely for profit.

A forex option is a derivative in that it derives its value from the price action in the currency pair it is written for. For example, if the option is for $10,000 CAD to be exchanged for $97,000 USD and the U.S. dollar falls in value against the Canadian dollar during the time the option is active, then the option gains value.

ⓘ Mira FX is not liable for any damage or loss, including but not limited to, any loss of investment, which may be based either directly orindirectly on the use of or reliance on such information. Before deciding whether or not to take part in foreign exchange or financial markets or any other type of financial instrument, please carefully consider your investment objectives, level of experience and risk appetite.

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