Financial Options Definition: A Guide to Forex Trading

4 min read

A financial option, defined as a derivative financial instrument, grants a buyer the right (but not the obligation) to buy or sell a security, such as a stock, currency, commodity, or index, at a predetermined price and date. Forex (FX) options are a type of financial option used in the foreign exchange (FX) market. They give the holder the right to buy or sell a certain amount of a specific foreign currency at a specified price within a predetermined amount of time. FX options are used by corporations, investors, and traders to hedge against and speculate on currency exchanges.