GENERAL KNOWLEDGE

Detailed explanation-1: -A currency option (also known as a forex option) is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain currency at a specified exchange rate on or before a specified date. For this right, a premium is paid to the seller.

Detailed explanation-2: -A put option gives you the right, but not the obligation, to sell a stock at a specific price (known as the strike price) by a specific time – at the option’s expiration.

Detailed explanation-3: -It allows the option buyer to exercise his right to buy the currency pair at the predetermined strike price on or before the expiration date of the contract. If the currency pair is below the Strike Price when the option expires, the option is worthless, and the option seller would keep the premium.

Detailed explanation-4: -What is a Foreign Currency Option? A foreign currency option gives its owner the right, but not the obligation, to buy or sell currency at a certain price (known as the strike price), either on or before a specific date. In exchange for this right, the buyer pays an up-front premium to the seller.

Detailed explanation-5: -There are two types of currency options: calls and puts. Buying a call option gives the holder the right to buy a currency pair for the strike price on or before the expiry date, and buying a put option gives the holder the right to sell a currency pair for the strike price on or before the expiry date.