Have you heard about George Soros; The legendary manager of Quantum Hedge Fund who had made a cool $1 Billion profit from a single bet. In the early 1990s, one day he was sitting in his office discussing currency markets with his associate. Both of them were of the opinion that the British pound was overpriced and Bank of England could not sustain its price for long.
He purchased $10 Billion of puts and calls forex options by gambling all the assets under his control as collateral on a single bet that in the end made history.
His knowledge of the currency markets was perfect. He was sure that his conviction that the Bank of England cannot sustain the overpriced British pound would come off right. Soon other currency speculators also joined. A huge selling pressure on British pound developed. Bank of England could not sustain the selling pressure too long and in a matter of 24 hours had to take British pound out of the European Monetary System and let it float freely.
The value of British pound plunged. George Soros gamble paid off. He is now famously called the Man who broke the Bank of England.
Currency markets are huge. Everyday roughly $3 trillion gets transacted in the forex markets. There are many methods, the traders can use for profiting from the volatility in the currency markets.
As a retail forex trader you can trade any of these contracts: spot, futures and options. Forwards and swaps are two contracts that are also traded in the forex interbank market between large institutions like banks, corporations and hedge funds.
Options are derivative contracts that let you buy or sell an underlying asset at a price called exercise price before a certain date known as the strike date. Unlike futures, you dont have the obligation to actually buy/sell the currency.
In case of a forex options the underlying asset is the currency. Now, forex options give you the right to purchase/sell a certain amount of a particular currency on payment of a premium.
How do you profit from forex options? When the currency price is above/below the strike price, you can exercise your option to buy/sell that currency by buying/selling the currency at the strike price. The difference between the strike price and the currency market price is your profit.
However, in case, the currency market price is below/above the strike price of the forex options; you need not exercise your right to buy/sell. By not exercising the forex options contract, you only lose the premium.
There is a very good Non Directional Forex Options Trading Strategy that does not depend on the direction of the market. In other words you dont need to predict whether the currency price is going to go up or down and make your profit regardless.
This method is guaranteed to give you profits with an ROI of 30-50%. Try this method. It is risk free.