Traditionally only within reach of institutions, Saxo Capital Markets helped pioneer private Forex trading, and as industry polls show, we have risen to become one of the most popular Forex trading providers in the business.
Live online FX options trading first bank to offer trading on live price quotes to private traders Forward outright future currency transactions Servicing Asia Pacific clients in their own time zone
If you are new to trading Forex or just interested in how Forex Trading works, you have come to the right place. Check out our Forex education and try a free download of our SaxoTrader trading platform to help you get started trading Forex.
currency markets that are moving, a SaxoTrader account offers direct and easy access to all these markets from a single consolidated account.
A good place to start is by registering and downloading the SaxoTrader trading platform demo. This demo allows you to trade Forex on a fully-functional trading platform, on live Forex prices and from a risk-free simulated account that can even be reset if you want to start again from scratch. Download Demo
This margin calculation offers lower requirements for options used to hedge spot positions a service previously only offered to professional traders.
Exercise/Expiry
Saxo Capital Markets supports New York Cut options which expire at 10:00 A.M. New York Time. Options that are in-the-money at expiry, are automatically exercised and converted to a spot position without the need for any intervention from you.
2. Margin requirements
Forex is traded on margin enabling you to leverage a small margin deposit for a much greater market effect where: First USD 25K margin rates apply to the first USD 25,000 (or equivalent) of your investment collateral Normal margin rates apply to all investment collateral over USD 25,000 (or equivalent)
3. Autoexecuted trades
Major currency trades can be autoexecuted for amounts below the autoexecution limit. Autoexecuted trades are automatically accepted without intervention from the bank. For trade sizes over the autoexecute limit and in volatile market conditions, the trade must first be approved by a dealer which normally takes just a few seconds. * Note that these are typical autoexecute limits that can change over the day, depending on the market conditions and available liquidity.
Margin calls
You must maintain the margins listed in your account at all times. If the funds in your account fall below this margin, you will be subject to a margin call to either deposit more funds to cover your positions or close positions normally you will be notified through our trading platform and via email. If your margin situation is not remedied, we may close positions on your behalf.
These Forex crosses and trading rates are available from a SaxoTrader account.
AUDCAD
10
1%
2%
Major
2,000,000
100,000
AUDCHF
10
1%
2%
Major
3,000,000
100,000
AUDCZK1 40
1%
2%
Major
1,000,000
50,000
AUDDKK
35
1%
2%
Major
100,000
AUDEUR
1%
2%
Major
2,000,000
100,000
AUDGBP
1%
2%
Major
100,000
AUDHUF1 40
1%
2%
Major
1,000,000
50,000
AUDJPY
1%
2%
Major
5,000,000
100,000
AUDNZD
13
1%
2%
Major
2,000,000
100,000
AUDPLN1 40
1%
2%
Major
1,000,000
50,000
AUDSEK
40
1%
2%
Major
1,000,000
100,000
AUDSGD
1%
2%
Major
1,000,000
50,000
AUDUSD
1%
2%
Major
5,000,000
100,000
CADCHF
1%
2%
Major
3,000,000
100,000
CADJPY
1%
2%
Major
5,000,000
100,000
CADPLN1 35
1%
2%
Major
1,000,000
100,000
CADUSD
400
1%
2%
Major
1,000,000
100,000
CHFAUD
10
1%
2%
Major
1,000,000
100,000
CHFCZK1 40
1%
2%
Major
50,000
50,000
CHFDKK
17
1%
2%
Major
5,000,000
100,000
CHFHUF1 40
1%
2%
Major
1,000,000
50,000
CHFJPY
1%
2%
Major
5,000,000
100,000
CHFNOK
30
1%
2%
Major
3,000,000
100,000
CHFPLN1 40
1%
2%
Major
1,000,000
50,000
CHFSEK
30
1%
2%
Major
3,000,000
100,000
CHFSGD
1%
2%
Major
1,000,000
100,000
CHFUSD
270
1%
2%
Major
2,000,000
100,000
DKKCZK1 15
1%
2%
Major
3,000,000
500,000
DKKHUF1 8
1%
2%
Major
3,000,000
500,000
DKKJPY
10
1%
2%
Major
10,000,000
1,000,000
DKKPLN1 7
1%
2%
Major
3,000,000
500,000
DKKSGD1 5
1%
2%
Major
3,000,000
500,000
EURAUD
10
1%
2%
Major
2,000,000
100,000
EURCAD
12
1%
2%
Major
3,000,000
100,000
EURCHF
1%
2%
Major
15,000,000
100,000
EURCZK1 30
1%
2%
Major
2,000,000
50,000
EURDKK
1%
2%
Major
25,000,000
100,000
EURGBP
1%
2%
Major
5,000,000
100,000
EURHKD
25
1%
2%
Major
5,000,000
50,000
EURHUF1 30
1%
2%
Major
2,000,000
50,000
EURJPY
1%
2%
Major
10,000,000
100,000
EURNOK
30
1%
2%
Major
3,000,000
100,000
EURNZD
12
1%
2%
Major
2,000,000
100,000
EURPLN1 35
1%
2%
Major
2,000,000
50,000
EURSEK
30
1%
2%
Major
3,000,000
100,000
EURSGD
12
1%
2%
Major
2,000,000
50,000
EURUSD
1%
2%
Major
35,000,000
50,000
GBPAUD
10
1%
2%
Major
2,000,000
100,000
GBPCAD
10
1%
2%
Major
2,000,000
100,000
GBPCHF
1%
2%
Major
5,000,000
100,000
GBPCZK1 100
1%
2%
Major
500,000
50,000
GBPDKK
55
1%
2%
Major
100,000
GBPEUR
1%
2%
Major
100,000
GBPHUF1 60
1%
2%
Major
50,000
GBPJPY
1%
2%
Major
5,000,000
100,000
GBPNOK 55
1%
2%
Major
2,000,000
100,000
GBPNZD
35
1%
2%
Major
250,000
100,000
GBPPLN1 60
1%
2%
Major
50,000
GBPSEK
55
1%
2%
Major
2,000,000
100,000
GBPSGD
15
1%
2%
Major
1,000,000
50,000
GBPUSD
1%
2%
Major
6,000,000
50,000
HKDJPY
45
1%
2%
Major
15,000,000
50,000
JPYDKK
1%
2%
Major
100,000,000
10,000,000
JPYNOK
1%
2%
Major
100,000,000
10,000,000
JPYUSD
1%
2%
Major
50,000,000
1,000,000
NOKDKK
1%
2%
Major
10,000,000
1,000,000
NOKJPY
10
1%
2%
Major
1,000,000
1,000,000
NOKSEK
1%
2%
Major
20,000,000
1,000,000
NOKUSD
100
1%
2%
Major
1,000,000
NZDAUD
12
1%
2%
Major
2,000,000
100,000
NZDCAD
10
1%
2%
Major
2,000,000
100,000
NZDCHF
10
1%
2%
Major
2,000,000
100,000
NZDCZK1 50
1%
2%
Major
1,000,000
50,000
NZDDKK
25
1%
2%
Major
2,000,000
100,000
NZDEUR
1%
2%
Major
2,000,000
100,000
NZDGBP
1%
2%
Major
100,000
NZDHUF1 40
1%
2%
Major
1,000,000
50,000
NZDJPY
1%
2%
Major
5,000,000
100,000
NZDPLN1 40
1%
2%
Major
1,000,000
50,000
NZDSEK
50
1%
2%
Major
2,000,000
100,000
NZDSGD
10
1%
2%
Major
1,000,000
50,000
NZDUSD
1%
2%
Major
5,000,000
100,000
PLNDKK1 30
1%
2%
Major
125,000
PLNJPY1
70
1%
2%
Major
2,000,000
125,000
PLNSEK1
35
1%
2%
Major
2,000,000
125,000
SEKDKK
1%
2%
Major
10,000,000
500,000
SEKJPY
10
1%
2%
Major
10,000,000
500,000
SEKNOK
1%
2%
Major
20,000,000
500,000
SEKPLN1
1%
2%
Major
2,000,000
50,000
SGDHKD
25
1%
2%
Major
2,000,000
100,000
SGDJPY
1%
2%
Major
2,000,000
50,000
USDCAD
1%
2%
Major
5,000,000
100,000
USDCHF
1%
2%
Major
20,000,000
50,000
USDCZK1 30
1%
2%
Major
50,000
USDDKK
25
1%
2%
Major
100,000
USDHKD
1%
2%
Major
5,000,000
50,000
USDHUF1 30
1%
2%
Major
2,000,000
50,000
USDJPY
1%
2%
Major
20,000,000
50,000
USDNOK
30
1%
2%
Major
3,000,000
100,000
USDPLN1 35
1%
2%
Major
2,000,000
50,000
USDRUB4 75
1%
2%
Major
1,000,000
50,000
USDSEK
30
1%
2%
Major
3,000,000
100,000
USDSGD
1%
2%
Major
5,000,000
50,000
AUDZAR1 90
2%
4%
Minor
1,000,000
100,000
CADMXN 65
4%
8%
Minor
250,000
100,000
CHFSKK1 30
2%
4%
Minor
1,000,000
100,000
CHFZAR1 100
2%
4%
Minor
1,000,000
50,000
DKKZAR1 30
2%
4%
Minor
3,000,000
500,000
EUREEK1 55
2%
4%
Minor
100,000
EURISK2
15
2%
4%
Minor
100,000
50,000
EURLTL1 35
2%
4%
Minor
100,000
100,000
EURMXN
4%
8%
Minor
1,000,000
100,000
EURRON3 50
2%
4%
Minor
250,000
50,000
EURSKK1 35
2%
4%
Minor
2,000,000
100,000
EURZAR1 100
2%
4%
Minor
1,000,000
125,000
GBPILS
80
2%
4%
Minor
50,000
GBPMXN 6
4%
8%
Minor
1,000,000
100,000
GBPSKK1 55
2%
4%
Minor
1,000,000
100,000
GBPZAR1 200
2%
4%
Minor
1,000,000
50,000
MXNJPY
4%
8%
Minor
3,000,000
100,000
NZDZAR1 75
2%
4%
Minor
1,000,000
100,000
USDAED1 7
2%
4%
Minor
250,000
50,000
USDBHD1 50
2%
4%
Minor
250,000
50,000
USDEEK1 10
2%
4%
Minor
100,000
USDILS1
40
2%
4%
Minor
50,000
USDISK2
15
2%
4%
Minor
50,000
50,000
USDJOD1 30
2%
4%
Minor
250,000
50,000
USDKWD1 15
2%
4%
Minor
250,000
50,000
USDLTL1
2%
4%
Minor
100,000
100,000
USDMXN
55
4%
8%
Minor
1,000,000
50,000
USDOMR1 15
2%
4%
Minor
50,000
USDQAR1 15
2%
4%
Minor
250,000
50,000
USDSAR1 5
2%
4%
Minor
250,000
50,000
USDSKK1 40
2%
4%
Minor
2,000,000
50,000
USDZAR1 100
2%
4%
Minor
1,000,000
50,000
ZARJPY1
2%
4%
Minor
5,000,000
50,000
AUDTRY1 35
4%
8%
Exotic
1,000,000
100,000
CADTRY1 40
4%
8%
Exotic
1,000,000
100,000
CHFTRY1 30
4%
8%
Exotic
1,000,000
100,000
CYPEUR1 65
4%
8%
Exotic
100,000
CYPUSD1 70
4%
8%
Exotic
50,000
EURLVL1 25
4%
8%
Exotic
100,000
100,000
EURTRY1 30
4%
8%
Exotic
1,000,000
50,000
GBPTRY1 40
4%
8%
Exotic
1,000,000
100,000
MTLEUR1 135
4%
8%
Exotic
50,000
MTLUSD1 160
4%
8%
Exotic
50,000
NZDTRY1 35
4%
8%
Exotic
1,000,000
100,000
TRYDKK1 80
4%
8%
Exotic
1,000,000
50,000
TRYJPY1
20
4%
8%
Exotic
1,000,000
100,000
USDHRK1 80
4%
8%
Exotic
100,000
USDLVL1
4%
8%
Exotic
100,000
100,000
USDTRY1 20
4%
8%
Exotic
1,000,000
50,000
XAGAUD1 8
2%
4%
Metals
30,000
5,000
XAGEUR1 6
2%
4%
Metals
30,000
5,000
XAGHKD1 4500
2%
4%
Metals
30,000
5,000
XAGJPY1 8.00
2%
4%
Metals
30,000
5,000
XAGUSD1 550
2%
4%
Metals
50,000
5,000
XAUAUD
1.00
2%
4%
Metals
1,000
100
XAUEUR
65
2%
4%
Metals
1,000
100
XAUHKD
7.00
2%
4%
Metals
1,000
100
XAUJPY
100
2%
4%
Metals
1,000
100
XAUUSD
60
2%
4%
Metals
2,000
100
Due to limited liquidity, these currency crosses can only be traded from 07.00 GMT to 15.00 GMT from Monday to Friday. Outside this time Market Orders are available to trade as soon as possible but we accept no responsibilities for price slippage between the close and open price on the next day's trading.
2 3 4
EURISK and USDISK - Trading hours are from 09.15 GMT to 16.00 GMT from Monday to Friday. EURRON - Trading hours are from 7.15 GMT to 14.00 GMT from Monday to Friday. USDRUB - Trading hours are from 06.00 GMT to 13.00 GMT from Monday to Friday.
The commission and margin rates referred to above may vary from time to time especially for very active or inactive customers. Saxo Capital Markets reserves the right to amend the commission rates, brokerage fees, margin rates and interest rates referred to according to the terms of the trading agreement entered into between Saxo Capital Markets and the Client.
These Forex crosses and trading rates are available from a Saxo MiniTrader account. Show crosses containing:
Cross 1) Target Spread (PIPs) 2) Margin Liquidity 3) Autoexecute*
AUDUSD
1%
Major
5,000,000
EURCHF
1%
Major
15,000,000
EURGBP
1%
Major
5,000,000
EURJPY
1%
Major
10,000,000
EURNOK
30
1%
Major
3,000,000
EURSEK
30
1%
Major
3,000,000
EURUSD
1%
Major
35,000,000
GBPCHF
1%
Major
5,000,000
GBPJPY
1%
Major
5,000,000
GBPUSD
1%
Major
6,000,000
NZDUSD
1%
Major
5,000,000
USDCAD
1%
Major
5,000,000
USDCHF
1%
Major
20,000,000
USDHKD
1%
Major
5,000,000
USDJPY
1%
Major
20,000,000
USDSGD
1%
Major
5,000,000
XAGEUR
2%
Metals
30,000
XAGJPY
8.00
2%
Metals
30,000
XAGUSD
550
2%
Metals
50,000
XAUUSD
60
2%
Metals
2,000
AUDJPY
12
RFQ
100,000
AUDNZD
10
RFQ
100,000
AUDUSD
5 mill
100,000
CADJPY
12
RFQ
100,000
CHFJPY
10
RFQ
100,000
EURAUD
12
RFQ
100,000
EURCAD
14
RFQ
100,000
EURCHF
10 mill
100,000
EURCZK
65
RFQ
100,000
EURGBP
10 mill
100,000
EURHUF
90
RFQ
100,000
EURJPY
10 mill
100,000
EURNOK
90
RFQ
100,000
EURNZD
25
RFQ
100,000
EURPLN
90
RFQ
100,000
EURSEK
90
RFQ
100,000
EURUSD
20 mill
50,000
GBPCAD
30
RFQ
100,000
GBPCHF
14
RFQ
100,000
GBPJPY
12
RFQ
100,000
GBPUSD
5 mill
50,000
NZDUSD
RFQ
100,000
NZDJPY
14
RFQ
100,000
USDCAD
5 mill
100,000
USDCHF
15 mill
50,000
USDHUF
90
RFQ
50,000
USDJPY
10 mill
50,000
USDNOK
90
RFQ
100000
USDPLN
90
RFQ
100,000
USDSEK
90
RFQ
100,000
USDTRY
65
RFQ
50000
USDZAR
350
RFQ
250,000
XAUUSD*
1.25
RFQ
100
XAGUSD*
0.1000
RFQ
5,000
The commission and margin rates referred to above may vary from time to time especially for very active or inactive customers. Saxo Capital Markets reserves the right to amend the commission rates, brokerage fees, margin rates and interest rates referred to according to the terms of the trading agreement entered into between Saxo Capital Markets and the Client.
The margins for Forex options are also subject to a volatility factor that may increase the margin requirements. This factor will be more prominent the longer the option expiry date.
Margin Calculations
Margin requirements for Forex options consist of a Delta Margin which is related to the exposure to changes in the spot market
Vega Margin which is related to changes in the volatility of the underlying spot Forex cross This allows you to hedge spot positions with options with lowered margin requirements. This service, previously only offered to Professional Traders, is now available to retail traders.
Exercise procedure
Options that are 'in the money' are automatically exercised at 10.00 A.M. New York time (New York cut) on the day of expiry where they are converted to a spot position. This spot position is subject to the usual profit/loss if the spot price moves from the exercise price. If you already have an offsetting position at exercise, the exercised position will be netted out on the following day.
Description
The Delta measure describes how the value of an option changes as a result of small changes in the underlying asset, assuming that all the other factors influencing option pricing are constant. The delta of an option can also be viewed as the required hedge for the option against changes in the underlying spot, i.e. the position in the spot which ensures that the Profit/Loss on the option is offset by the Profit/Loss on the spot position. For each options position, the table below indicates the direction, i.e. whether to buy or sell, of the hedge position in the spot.
Technical Description
The first derivative of the option price with respect to the underlying asset (i.e. the slope of the option's price-curve at the spot rate). Position Long Call Long Put Short Call Short Put
Sell
Buy
Buy
Sell
Example Call
If an investor buys a 40 Delta EUR/USD Call for one million, he/she can hedge this position by selling 400,000 in the underlying asset - i.e. the spot. Alternatively, if the investor had bought a 30 Delta EUR/USD Call he/she would have to sell 300,000 in the spot market to become delta neutral.
Example Put
If the investor buys a 55 Delta EUR/USD Put for 1.000.000, he/she would have to buy 550.000 in the spot market. Alternatively, if the investor sells the Put, the corresponding hedge would be a short position in the spot market, as indicated in the table above.
AUDJPY
12
RFQ
100,000
AUDNZD
10
RFQ
100,000
AUDUSD
5 mill
100,000
CADJPY
12
RFQ
100,000
CHFJPY
10
RFQ
100,000
EURAUD
12
RFQ
100,000
EURCAD
14
RFQ
100,000
EURCHF
10 mill
100,000
EURCZK
65
RFQ
100,000
EURGBP
10 mill
100,000
EURHUF
90
RFQ
100,000
EURJPY
10 mill
100,000
EURNOK
90
RFQ
100,000
EURNZD
25
RFQ
100,000
EURPLN
90
RFQ
100,000
EURSEK
90
RFQ
100,000
EURUSD
20 mill
50,000
GBPCAD
30
RFQ
100,000
GBPCHF
14
RFQ
100,000
GBPJPY
12
RFQ
100,000
GBPUSD
5 mill
50,000
NZDUSD
RFQ
100,000
NZDJPY
14
RFQ
100,000
USDCAD
5 mill
100,000
USDCHF
15 mill
50,000
USDHUF
90
RFQ
50,000
USDJPY
10 mill
50,000
USDNOK
90
RFQ
100000
USDPLN
90
RFQ
100,000
USDSEK
90
RFQ
100,000
USDTRY
65
RFQ
50000
USDZAR
350
RFQ
250,000
XAUUSD*
1.25
RFQ
100
XAGUSD*
0.1000
RFQ
5,000
The commission and margin rates referred to above may vary from time to time especially for very active or inactive customers. Saxo Capital Markets reserves the right to amend the commission rates, brokerage fees, margin rates and interest rates referred to according to the terms of the trading agreement entered into between Saxo Capital Markets and the Client.
Margin Calculations
Margin requirements for Forex options consist of a Delta Margin which is related to the exposure to changes in the spot market
Vega Margin which is related to changes in the volatility of the underlying spot Forex cross This allows you to hedge spot positions with options with lowered margin requirements. This service, previously only offered to Professional Traders, is now available to retail traders.
Exercise procedure
Options that are 'in the money' are automatically exercised at 10.00 A.M. New York time (New York cut) on the day of expiry where they are converted to a spot position. This spot position is subject to the usual profit/loss if the spot price moves from the exercise price. If you already have an offsetting position at exercise, the exercised position will be netted out on the following day.
Risk warning Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Please read our full Analysis Disclosure & Disclaimer at
Strategy Recommendation
If you are short in the spot and want to protect your position, while at the same time taking a profit/reducing cost, you can use a Short Collar.
SHORT COLLAR
A Short Collar can be used when you have a short position in the spot and you believe that the market will move in favor of your position in the long term, but you are concerned that there will be a large correction in the short term. You want to protect your position against the correction while at the same time limit the cost of the hedge.
Action
Buy a Call option (with strike A) to protect the downside while selling a Put (with strike B) to reduce the cost of the hedge. As a result, the short position in the spot is transformed into a synthetic Put Spread until the options expire.
example
You are Short EUR/USD. You expect a possible large correction over the next two weeks. The spot is 1.18. You buy a EUR/USD Call for two weeks with a strike of 1.1800. The option's premium is 88 pips. You sell a EUR/USD Put with a strike of 1.1650. The option's premium is 22 pips. You therefore pay a net premium of 66 pips.
Upside
If the spot rises, the bought Call ensures that the short position in the spot can be bought back at the strike price.
Downside
If the spot decreases, the profit is less than it would have been without the collar. By selling the Put, you forfeit all profit below 1.1650. In addition, you also lose the premium paid for the hedge.
PROTECTIVE CALL
A Protective Call is primarily used when traders expect a significant, short-term correction. By using the Call to protect your short position, you can stay in the market but avoid significant losses in the event that the market moves against your position.
action
Buy a Call option on the underlying asset with a strike price A. This hedge will turn the Short spot position into a synthetic Long Put until the option expires (see graph).
example
You are Short EUR/USD. You expect a possibly large correction over the next two weeks. The spot is 1.18. You buy a EUR/USD Call for two weeks with a strike of 1.18. You pay a premium of 88 pips.
Upside
If the spot increases, you will exercise the Call, which allows you to square off the position, i.e. to buy the short position back, at the strike rather than at the higher prevailing spot at the time of expiry.
Downside
The risk is that the option expires as worthless and the premium is lost.
SHORT COLLAR
A Short Collar can be used when you have a short position in the spot and you believe that the market will move in favor of your position in the long term, but you are concerned that there will be a large correction in the short term. You want to protect your position against the correction while at the same time limit the cost of the hedge.
Action
Buy a Call option (with strike A) to protect the downside while selling a Put (with strike B) to reduce the cost of the hedge. As a result, the short position in the spot is transformed into a synthetic Put Spread until the options expire.
example
You are Short EUR/USD. You expect a possible large correction over the next two weeks. The spot is 1.18. You buy a EUR/USD Call for two weeks with a strike of 1.1800. The option's
premium is 88 pips. You sell a EUR/USD Put with a strike of 1.1650. The option's premium is 22 pips. You therefore pay a net premium of 66 pips.
Upside
If the spot rises, the bought Call ensures that the short position in the spot can be bought back at the strike price.
Downside
If the spot decreases, the profit is less than it would have been without the collar. By selling the Put, you forfeit all profit below 1.1650. In addition, you also lose the premium paid for the hedge.
COVERED PUT
Covered Puts are generally used in dormant markets, where you have are generally positive about your position's performance in the long-term, but wish to capitalise on the market's short-term performance.
action
Sell a Put option with strike A (see graph). Select the strike price at a level you do not believe will be breached prior to the option's expiry. This action turns your short position into a synthetic Short Call during the time the sold Put option is present (i.e. during the time you expect the market to be only mildly bearish).
example
You are Short EUR/USD. You expect a mildly bearish but calm market over the next week. The spot is 1.18. You sell EUR/USD Put for one week with a strike of 1.17. The option's premium is 22 pips.
Upside
If the option expires worthless, you profit from the premium of the sold Put.
Downside
The risk is that the spot moves below 1.17, in which case you forfeit the additional profit (from the short position in the spot) beyond this point.
PROTECTIVE PUT
A Protective Put is used when you are positive about your position in the long-term, but you are concerned in the short-term about a downward correction in the spot.
action
Buy a Put option on the underlying asset with a strike price A. This transforms the long spot position into a synthetic Long Call while the Protective Put is in effect(see graph).
example
You are Long EUR/USD. You expect a possible large correction over the next two weeks. The spot is 1.18. You buy a EUR/USD Put for two weeks with a strike of 1.18. The option's premium is 80 pips.
Upside
The benefit of this strategy is that, in the event the market tumbles, you can sell your long position in the asset at the strike price rather than at the lower prevailing market price.
Downside
The risk is that the option expires as worthless and the premium is lost.
CALL SPREAD
Long Collars are generally used when a significant, short-term correction is expected in the spot.
Action
Buy a Put option (with strike A) to protect the long position while selling a Call (with strike B) to reduce the cost of the protection. This hedge will transform the Long spot into a synthetic Call Spread until the options expire.
Example
You are Long EUR/USD. You expect a possible large correction over the next two weeks. The spot is 1.18. You buy a two-week EUR/USD Put with a strike of 1.1800 for a premium of 78 pips. You sell a two-week EUR/USD Call with a strike of 1.1950 for a premium of 27 pips. You therefore pay a net premium of 51 pips.
Upside
If the spot falls, the bought Put ensures that the long position in the spot can be sold at the strike price.
Downside
If the spot exceeds 1.1950 at expiry, any profit on the original Long spot position is forfeited beyond this point. In addition, if the options are not exercised, the net premium paid is also lost.
CALL SPREAD
Long Collars are generally used when a significant, short-term correction is expected in the spot.
Action
Buy a Put option (with strike A) to protect the long position while selling a Call (with strike B) to reduce the cost of the protection. This hedge will transform the Long spot into a synthetic Call Spread until the options expire.
Example
You are Long EUR/USD. You expect a possible large correction over the next two weeks. The spot is 1.18. You buy a two-week EUR/USD Put with a strike of 1.1800 for a premium of 78 pips. You sell a two-week EUR/USD Call with a strike of 1.1950 for a premium of 27 pips. You therefore pay a net premium of 51 pips.
Upside
If the spot falls, the bought Put ensures that the long position in the spot can be sold at the strike price.
Downside
If the spot exceeds 1.1950 at expiry, any profit on the original Long spot position is forfeited beyond this point. In addition, if the options are not exercised, the net premium paid is also lost.
COVERED CALL
A Covered Call is primarily used in dormant markets. This strategy allows you to maintain your position in the spot, while profiting from sold Call if your expectations regarding the market are realised.
action
Sell a Call option with strike A (see graph). The strike price should be selected at a point you do not believe will be breached prior to the expiry date of the option.
example
You are Long EUR/USD. You expect a mildly bullish but calm EUR/USD market over the next week. The spot is 1.18. You sell a EUR/USD Call for one week with a strike of 1.19. The option's premium is 20 pips.
Upside
This strategy's profit potential is the premium you received when you sold the option.
Downside
If the spot increases beyond 1.19, the holder of the option will exercise the Call and you will thus have to sell at the strike of the Covered Call. This implies that any profit potential on the Long spot position beyond 1.19 is forfeited.
LONG CALL
Long Calls can be used to take advantage of a developing or existing, short or long-term increasing trend in the spot.
Action
Buy Call with strike A (see graph). Any strike price is bullish, however, the higher you set the strike , the more out-of-the-money the option is, thus the higher the leverage.
example
You believe EUR/USD will rise towards the 1.22 level in about a month's time. The spot is currently 1.1720. You buy EUR/USD Call for one month with a strike of 1.1750. The price is 108 pips.
Upside
The profit region for this option is any spot price above 1.1858(the option's break-even point) and is potentially unlimited.
Downside
The risk is limited to the cost of the premium (108 pips), which will be lost if the options are worthless at the time of expiry.
Strategy Recommendation
For example, if you are bullish on the volatility of EUR/USD, you believe that the volatility is priced too low for this currency pair. If you are bearish on the currency and volatility, you can use a Short Call as your options strategy.
SHORT CALL
A Short Call allows you to capitalise on bearish markets. You can use this strategy when you expect minor changes in the spot, and you believe that these changes will result in a decrease in the spot. You can also use this strategy if you believe that the option is priced too high, i.e. the market expects the price to move more than you think it will.
action
Sell Call with strike A (See Short Call graph). Any strike price you select should be bearish, reflecting your view of how the currency will perform over the period of the option.
Example
You expect EUR/USD to remain fairly stable at the current market levels for the next month. The spot is 1.1720. You sell a EUR/USD Call with a strike of 1.18 for a premium of 86 pips.
Upside
This strategy's profit potential is the premium received, 38 pips.
Downside
The risk region for this strategy is any price above 1.1886 at the time the option expires.
What is an Option?
An option gives you the right, but not the obligation to either buy (Call Option) or sell (Put Option) an asset at a certain price (known as the strike) on a certain date. For this right to buy or sell the underlying asset, you pay a premium upfront to the seller of the option. Whether you choose to use, or exercise, this right, is dependent upon the market conditions at the time the option expires.
Example
If you have a contract stating that you can buy EUR/USD on June 1st at the price of 1.2000, you have an option - an option to buy EUR/USD. If the value of EUR/USD is higher than USD 1.2000 on June 1st, you will profit from buying it because you can then turn around and sell it for more than 1.2000. On the other hand, if the value is less than 1.2000, you wouldn't want to buy the currency at the price in the contract, since you could instead buy EUR/USD at the market price. Since an option gives you the right but not the obligation to either buy or sell an asset, you are entitled not to buy EUR/USD if the price doesn't suit you. Next we will take a closer look at how an investor trades Forex Options, including the factors influencing the decision to exercise the option.
A Trading Scenario
You expect that the British pound will strengthen significantly against the yen and rise well above the current level in the coming days. The current market price is 203.51. To capitalise on this expected change in the market, you decide to buy a GBP/JPY Call Option. You set a strike price of 203.61 for one month from now, i.e. an expiry date of 6 February. This means that on the 6 February you have the right to buy 1,000,000 GBP/JPY at the price of 203.61. Using the Option panel within SaxoTrader, your trade would look like this:
If the spot rate was quoted below the strike price (203.61), the option would have been out of the money. Since you could not profit from exercising the option, you would simply let the option expire and purchase GBP/JPY at the spot price (if you wished to enter a position). In that case, you would have lost your premium, but your risk in this transaction was limited to the premium and nothing more. Your profit/loss scenario is illustrated below. As you can see, by purchasing the call option, you can make unlimited profit but the maximum loss is the premium paid. Because you paid the 154-pip premium up front, your break-even point is not simply the strike price of 203.61, but the strike price plus the premium paid, or 205.15.
Profit/Loss
Now that we have looked at the ways that you can profit from a Forex Options trade, let's take a closer look at the factors influencing the value of an option.
Intrinsic Value
Market convention is to refer to the price of the underlying asset minus the strike of the option as the option's intrinsic value (for a Call option, for a Put it is just the opposite). Theoretically, one could argue that the forward rate of the underlying asset should be used instead of its spot, but market convention is to use the spot.
Time Value
Simply put, an option's time value is the amount by which the value of the option exceeds the intrinsic value. The volatility of the underlying asset has a significant bearing on the time value. Time value increases as volatility increases because of the Profit/Loss scenario for an option. As previously mentioned, the potential upside for an option holder is unlimited, while the downside is limited to the premium paid. Hence, an option on an asset which is more likely to take on extreme values is much more valuable than on a less volatile asset. Interest rates differentials in the two currencies involved in a currency option trade must also be taken into consideration when pricing an option, and these are also a function of time. This graph depicts how a call option is priced according to how close the asset price is to the strike price for the option.
Let's say that you hold a Call option with a 1.2000 strike price, and that the market price of EUR/USD has risen to 1.2155. Your option is worth 225 pips thirty days before the option's expiration date. The intrinsic value is the difference between the strike price for the underlying asset in the option contract (1.2000) and the market price (1.2155). If you hold a call option, which gives you the right to buy EUR/USD at 1.2000 and the market price is 1.2155 the intrinsic value of the option is 155 pips. So the price of the option is the intrinsic value plus the time value (in this case 70 pips). Now that we have examined basic ways of trading options, their value and the profit/loss potential of trading these products, let's look at some of the advantages of trading Forex Options.
5. Trading Forex Options at Saxo Bank allows you to trade on live, streaming prices for nine major currency pairs. Read more about trading Forex Options at Saxo Bank.
Saxo Bank offers Over the Counter (OTC) plain vanilla European style Forex options in Options for 9 major Forex 33 major currency crosses, traded crosses are traded directly on live price quotes without dealer online through our SaxoTrader intervention. For other crosses, SaxoTrader offers good price platform. We also offer two types indications. of exotic options barrier and touch which are available across For options with expiries outside 1 week to 6 months, exotic and nine currency crosses: EURUSD, multiple leg options, prices are quoted by a dealer on request. EURJPY, EURGBP, EURCHF, USDJPY, USDCHF, USDCAD, GBPUSD, and AUDUSD.
Exercise/Expiry
Forex Options Saxo Bank supports New York Cut options which expire at 10:00 A.M. Education New York Time. For options that are in-the-money at expiry, Saxo Bank Forex Options automatically exercises the option and converts it to a spot position trading rates and without the need for any intervention from you. conditions Find the right options strategy with Strategy Maker
streaming price quotes (no dealer intervention) Gold and Silver options Low margin requirements with professional netting calculation for hedging spot positions Automatic exercise of options on expiry Use other investments (including stocks and bonds) as collateral for options trading
Delta margin related to the related exposure in the spot market Vega margin related to changes in volatility of the underlying spot Forex Any open related spot positions
This margin calculation offers lower requirements for options used to hedge spot positions a service previously only offered to professional traders.
Swap Rates
Swap Rates
Select the original value date and one of the traded currencies for an open position. The new value date and swap points applied at rollover for both Long and Short positions are displayed. These swap rates are for indication purposes only and may differ slightly from those applied to your trading account.
Rollover Date
Currency
Value Dates Forex Cross From To AUDUSD 22-Oct-2007 23-Oct-2007 EURUSD 22-Oct-2007 23-Oct-2007 GBPUSD 22-Oct-2007 23-Oct-2007 NZDUSD 23-Oct-2007 24-Oct-2007 USDCAD 19-Oct-2007 22-Oct-2007 USDCHF 22-Oct-2007 23-Oct-2007 USDCZK 22-Oct-2007 23-Oct-2007 USDDKK 22-Oct-2007 23-Oct-2007 USDJPY 22-Oct-2007 23-Oct-2007 USDNOK 22-Oct-2007 23-Oct-2007 USDSEK 22-Oct-2007 23-Oct-2007 USDSGD 22-Oct-2007 23-Oct-2007 USDPLN 22-Oct-2007 23-Oct-2007 USDZAR 22-Oct-2007 23-Oct-2007 USDHKD 22-Oct-2007 23-Oct-2007 USDKRW 22-Oct-2007 23-Oct-2007 USDMYR 22-Oct-2007 23-Oct-2007
Swap Points Long Positions Short Positions -0.000025 -0.000056 0.000054 0.000009 -0.00002 -0.000087 -0.000057 -0.000087 0.000054 -0.000067 -0.000069 -0.000114 -0.00051 -0.00119 -0.000011 -0.000191 -0.012 -0.0159 0.000171 -0.000074 -0.000059 -0.000282 -0.00007 -0.00012 0.00004 -0.00005 0.00114 0.000862 0.000152 -0.000184 -0.107 -0.137 -0.000067 -0.000178
USDMXN USDPHP USDSAR USDTHB USDTWD USDEGP USDIDR USDJOD USDKWD USDMAD USDOMR USDQAR USDAED USDBHD USDBRL USDHUF USDINR USDISK USDVEB USDCNY CYPUSD JPYUSD USDEUR USDGBP HKDUSD CADUSD USDILS USDLTL USDEEK USDHRK USDLVL MTLUSD USDSKK USDDZD USDIRR USDIQD USDLBP USDLYD USDSYP USDTND USDYER XAUUSD
22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 24-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 19-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007
23-Oct-2007 23-Oct-2007 23-Oct-2007 24-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 25-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 22-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007
0.000874 0.00157 0.00003 -0.00184 -0.00381 -0.000648 -1 0.000013 0.0000138 -0.000925 -0.000005 0.0001 0.000075 0.0000095 -0.0001 0.0175 0.0021 0.0146 -0.2513 -0.000878 0.000126 0.0000012016 -0.000004401 0.0000207524 0.0000030628 0.000070753 -0.000008 0.00007 0.000086 0.000211 0.00003 0.000125 0.00014 -0.007899 -1.09 -0.14 -0.17 -0.0001453 -0.0059 -0.000145 -0.0232 0.1091
0.000413 -0.00105 -0.000104 -0.00416 -0.00484 -0.000824 -1.33 -0.000013 -0.0000028 -0.001176 -0.0000198 -0.000066 -0.000072 -0.0000051 -0.00018 0.0107 0.0007 0.0122 -0.3194 -0.001117 -0.000088 0.0000009069 -0.0000264054 0.0000047705 -0.00000253 -0.0000570178 -0.000169 -0.000034 -0.000411 -0.000022 0.000003 -0.000013 -0.00093 -0.010036 -1.39 -0.19 -0.23 -0.0001848 -0.0077 -0.000185 -0.0296 0.0955
XAGUSD USDRUB USDTRY CHFUSD CZKUSD DKKUSD HRKUSD HUFUSD ILSUSD ISKUSD MXNUSD MYRUSD NOKUSD PLNUSD SEKUSD SGDUSD THBUSD TRYUSD USDNZD ZARUSD SKKUSD USDAUD RUBUSD USDRON RONUSD AEDUSD
Forex Cross
22-Oct-2007 19-Oct-2007 19-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 24-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 19-Oct-2007 23-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007 19-Oct-2007 22-Oct-2007 22-Oct-2007 22-Oct-2007
23-Oct-2007 22-Oct-2007 22-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 25-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 24-Oct-2007 22-Oct-2007 24-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007 22-Oct-2007 23-Oct-2007 23-Oct-2007 23-Oct-2007
0.002246 0.00265 0.001333 0.0000836137 0.0000032581 0.0000070306 0.0000008385 -0.0000003485 0.0000104985 -0.0000033956 -0.0000035515 0.0000157465 0.0000025653 0.0000075065 0.0000068534 0.0000559488 0.0000035633 -0.0007362614 0.0001551187 -0.0000185889 0.0000017035 0.000070076 0.0000028517 0.000117 0.0000047025 0.0000053425
0.001619 -0.00176 0.001075 0.0000506063 0.0000013963 0.0000004049 -0.0000080418 -0.00000057 0.000000497 -0.0000040634 -0.0000075155 0.0000059268 -0.0000059276 -0.000006005 0.0000014338 0.0000326357 0.000001576 -0.0009127694 0.0001016254 -0.0000245829 -0.0000002564 0.0000312828 -0.000004293 -0.000026 -0.0000211598 -0.0000055649
The Forex currency cross to which the swap rates apply in held on the selected Value Date. Select a currency from your Forex currency cross from the Currency drop-down list above.
Value Dates
These fields show the selected Original Value Date for a position and the new Value Date after rollover.
Value Date To
The new value date after rollover (the next business day).
Swap Points
These Swap Points were added to open positions at rollover.
Interest Rates
The rates displayed are the mid money market rates for the given interest rate periods. All rates are for information purposes only. Currency 1 day 1 week 2 weeks 1 month 2 months 3 months 6 months 9 months 1 year
EUR
3.94
4.03
4.04
4.08
4.26
4.56
4.42
4.44
4.48
USD
4.6
4.8
4.75
4.75
4.86
4.85
4.7
4.72
JPY
0.5
0.48
0.52
0.6
0.74
0.88
0.9
0.97
0.99
GBP
5.75
5.78
5.85
5.95
6.03
6.15
6.16
6.11
5.99
THB
3.25
3.16
3.16
3.16
3.25
3.05
3.08
3.1
3.31
AUD
6.2
6.32
6.3748
6.5
6.68
6.73
7.01
7.09
7.25
CAD
4.4
4.52
4.63
4.66
4.73
4.82
4.87
4.82
4.84
CHF
1.84
2.04
2.09
2.28
2.5
2.7
2.71
2.78
2.86
CZK
3.16
3.18
3.21
3.27
3.37
3.52
3.52
3.6
3.7
DKK
4.1
4.15
4.1591
4.18
4.28
4.47
4.51
4.48
4.5
HKD
4.3
4.97
5.2
5.05
4.91
4.96
4.69
4.57
4.52
IDR
0.1
13
INR
6.1154
6.25
7.25
8.25
8.5
9.5
ISK
12.8
13.3
13.35
13.45
13.55
13.6
13.75
13.75
13.7
MYR
3.45
3.5
3.4909
3.47
3.53
3.55
3.58
3.6
3.65
NOK
5.14
5.14
5.2
5.3
5.34
5.45
5.57
5.65
5.7
NZD
8.1
8.17
8.1943
8.25
8.43
8.53
8.67
8.8
8.78
PHP
4.5
6.05
6.2
6.41
6.41
6.4
5.84
5.68
5.66
SEK
3.75
3.77
3.8339
3.98
4.05
4.2
4.41
4.49
4.45
SGD
1.5
2.33
2.3087
2.26
2.35
2.4
2.46
2.56
2.5
ZAR
10.15
10
10.1826
10.6
10.6
10.8
10.95
10.84
11.2
PLN
4.79
4.78
4.79
4.83
4.87
4.97
5.13
5.23
5.33
HUF
7.38
7.21
6.95
6.96
7.02
7.06
6.9
6.82
6.86
CYP
3.5
3.85
3.8957
4.05
4.1
4.25
4.25
4.25
EEK
4.0304
4.1
4.25
4.5
4.6
4.6
4.55
HRK
4.5
5.2
5.5
5.9
5.7
5.7
LTL
4.6
4.65
4.8
5.15
5.35
5.35
5.4
5.4
If you are used to trading stocks, this page discusses a few of the similarities and differences when trading Forex.
Trading differences
If you are moving into Forex trading from trading stocks, there are a few benefits that Forex trading has to offer that you should be aware of: 24-hour trading Forex is traded around the clock so you can enter and exit positions whenever you like. Unlike stock markets which open and close at scheduled times and the price in between can be uncertain, Forex markets are seamless and allow you to trade to your own schedule. Live execution at displayed prices The liquidity (trading volume) in major currency crosses is so large that we can guarantee that your trade will be executed at the price displayed up to large trade volumes. If the price is displayed in green, that is the price you can rely on. You dont need to wait until your trade has been routed to an exchange order book to tell you at what price your order was filled at as with stock trades. Direct Short Selling In fact, there is no such thing as short selling in Forex trading to take advantage of a downward price trend. Selling EURUSD simply means you are buying Dollars using Euros (because you believe the Dollar is going to strengthen against the Euro). There are no up-tick or complicated rules you need to be aware of, like in the equity markets. Commission-free trading Sounds too good to be true? The way we make our money at Saxo Capital Markets is from the small difference between the ask price (the buy price) and the bid price (sell price) for the Forex cross. For small trades we have to cover our costs but for trades above our minimum threshold, we
Long Call
Scenario
You want to capitalise on an increasing trend in the spot market. The trend could be either short or long term.
Action
Buy Call with strike A (see Long Call graph). Any strike price is bullish, however, the higher you set the strike , the more out-of-the-money the option is, thus the higher the leverage.
For Reference
example
You believe EUR/USD will rise towards the 1.22 level in about a month's time. The spot is currently 1.1720. You buy EUR/USD Call for one month with a strike of 1.1750. The price is 108 pips.
Upside
The profit region for this option is any spot price above 1.1858(the option's break-even point) and is potentially unlimited.
Downside
The risk is limited to the cost of the premium (108 pips), which will be lost if the options are worthless at the time of expiry.
Short Call
scenario
You expect minor changes in the spot, and these will more than likely result in a decrease in the spot. You can also use this strategy if you believe that the option is priced too high, i.e. the market expects the price to move more than you think it will.
action
Sell Call with strike A (See Short Call graph). Any strike price you select should be bearish, reflecting your view of how the currency will perform over the period of the option.
For Reference
Example
You expect EUR/USD to remain fairly stable at the current market levels for the next month. The spot is 1.1720. You sell a EUR/USD Call with a strike of 1.18 for a premium of 86 pips.
Upside
This strategy's profit potential is the premium received, 86 pips.
Downside
The risk region for this strategy is any price above 1.1886 at the time the option expires.
Long Straddle
scenario
You anticipate a large move in the spot, perhaps in connection with a certain event, but you are not sure of the direction of the move.
action
Buy a Put and a Call with the same strike price. The strike price should be roughly at-themoney (equal or nearly equal to the market price).
For Reference
Example
You believe that EUR/USD will move significantly in either direction in the next month. The spot is 1.1730 and the forward price is app. 1.1750. You buy a EUR/USD Call and a EUR/USD Put for one month with a strike of 1.1750 for a premium of 128 pips and 127 pips, respectively. The total premium is 255 pips.
Upside
The profit region is any price above 1.2005 or below 1.1495.
Downside
The risk is limited to the cost of the premiums (255 pips), which will be lost if the options are worthless at the time of expiry.
Long Strangle
Scenario
You anticipate a large move in the spot, in either direction, if the spot price breaches certain levels.
Action
Buy a Put with strike price A and a Call with strike price B (see Long Strangle graph). Choose the strike prices according to which levels you believe will trigger large moves in the spot.
For Reference
Example
You believe EUR/USD will have a large swing in price if certain levels are breached. The spot is 1.1730. You buy a one-month EUR/USD Call with a strike of 1.19 for a premium of 67 pips and a EUR/USD Put with a strike of 1.16 for a premium of 67 pips.
Upside
This strategy yields a profit if the spot is below 1.1466 or above 1.2034 at the time of expiry.
Downside
The risk is limited to the cost of the premiums (134 pips), which will be lost if the options are worthless at the time of expiry.
Short Strangle
Selling a Strangle is a popular strategy for use in dormant markets. You would use this strategy when you expect a currency to trade within a certain range and not breach a specific up and down level.
Action
Sell a Put with strike A and a Call with strike B. Choose the strike prices according to what you believe will be the upper and lower limits of the range trading.
Example
You expect EUR/USD to trade between 1.16 and 1.19 during the next week. The spot is currently 1.1730. You sell a one-week EUR/USD Call with a strike of 1.1900 for a premium of 60 pips. You sell a one-week EUR/USD Put with a strike of 1.600 for the same premium. Your profit region is above 1.1480 and below 1.2020.
Profit Potential
Your profit is limited to the premium of the two sold options.
Risk
The risk is unlimited if the option expires in-the-money.
Call Spread
Scenario
You expect a moderate increase in the spot.
Action
Buy a Call with strike price A and sell a Call with strike price B (see Call Spread graph). Strike price A would be selected roughly at-the-money. Strike price B should be placed at the the value you expect the spot to have at the time the option matures.
For Reference
Example
EUR/USD spot is 1.1730. You expect it to increase to app. 1.20 within a month's time. You buy a EUR/USD Call with a strike of 1.18 for a premium of 105 pips. You sell a EUR/USD Call with a strike of 1.20 for a premium of 39 pips.
Upside
You profit potential is any price above 1.1866, but with a ceiling of 1.20.
Downside
The loss of the net premium paid, or 66 pips (the net value of the premium paid minus the premium received), if the option is worthless at the time of expiry.