The Forex Options Course E-Book

Abe Cofnas

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Trading Series
• Sprache: Englisch

Seitenzahl: 193

Veröffentlichungsjahr: 2008

Beschreibung

The Forex Options Course is a practical, hands-on guide to understanding and trading forex options. Designed to build a trader's knowledge base in a step-by-step manner, this reliable resource moves from the straightforward to the more sophisticated with discussions of everything from basic plain vanilla calls and puts to intriguing first-generation exotic binary options. Written in a straightforward and accessible style, The Forex Options Course will help you develop the skills and strategies needed to succeed in today's dynamic forex market.

Leseprobe

Table of Contents

Title Page

Copyright Page

Preface

Acknowledgements

About the Author

PART ONE - Key Option Elements

CHAPTER 1 - The Elements of an Option Trade

PLAIN VANILLA OPTIONS

PURCHASING AN OPTION

WRITING AN OPTION—BEGINNERS DON’T

ELEMENTS OF AN OPTION TRADE OR TICKET

THE GREEKS

SUMMARY

CHAPTER 2 - What Affects Forex Option Prices?

TIME

VOLATILITY

SUMMARY

PART TWO - Forex Market Drivers

CHAPTER 3 - Finding Direction for Your Forex Option Trade

THE IMPORTANCE OF INTEREST RATE EXPECTATIONS

HOW TO ANTICIPATE THE DIRECTION OF THE FEDERAL OPEN MARKET COMMITTEE (FOMC)

HOW TO USE HOUSING SECTOR DATA FOR DEVELOPING FOREX OPTION TRADE DIRECTION

EVALUATING REAL ESTATE EXCHANGE-TRADED FUNDS (ETFs)

SUMMARY

CHAPTER 4 - Tracking Fundamental Directions

USING CURRENCY TARGETED EXCHANGE-TRADED FUNDS (ETFs) TO DETERMINE IF THE MARKET ...

DIAGNOSING GLOBAL ECONOMIC CONDITIONS

GROUP CURRENCIES BY PURCHASING POWER PARITY (PPP) (BIG MAC INDEX)

TRACKING THE CURRENCY-COMMODITY CONNECTION

THE CURRENCY OUTLOOK CHECKLIST

SUMMARY

PART THREE - Timing the Trade with Technical Analysis

CHAPTER 5 - Chart Patterns and Trade Entry

CHART PATTERNS AND HOW TO USE THEM

SCANNING FOR VOLATILITY

SUMMARY

CHAPTER 6 - Using Experts to Shape Trading Decisions

FORECASTING ACCURACY?

PROFESSIONAL SOURCES OF EXPERT FOREX OPINION

FOLLOW THE HOUSING PRICES

FOLLOW THE THINK TANKS

FOLLOW THE BANK FORECASTS

SUMMARY

PART FOUR - Forex Options Strategies

CHAPTER 7 - Vanilla, Spreads, and Volatility Strategies

PLAIN VANILLA STRATEGIES

CURRENCY PAIR SPREADS: PLAYING THE CORRELATIONS AND DIVERGENCIES

COMMODITY-CURRENCY SPREAD STRATEGIES

CARRY TRADE OPTION STRATEGIES

TRADING DELTA CALL/PUT RATIOS

TRADING VEGA OR VOLATILITY

GAMMA SPREAD TRADING

KEY FOREX OPTION COMBINATIONS AND COMPONENTS

SUMMARY

CHAPTER 8 - Binary Option Strategies

WHAT IS A BINARY OPTION?

USING EXOTICS TO DERIVE MARKET SENTIMENT

COMBINING BINARY OPTIONS WITH PLAIN VANILLA AND SPOT TRADING

SUMMARY

CHPTER 9 - Option Strategies for Extreme Outcomes and Scenarios

RECESSION IN CHINA OR CONTINUED BOOM

OPTION TRADING TO PLAY CARRY TRADES WITH HEDGE—PUTTING ON COLLARS

$1000+ GOLD AND $200+ CRUDE OIL

TRADING $OIL SHOCK ($200) IN FOREX OPTIONS

PLAY A U.S. STAGFLATION AND INFLATION

PREEMPTIVE ATTACK ON IRAN

RECOVERY OF HOUSING

SUMMARY

CONCLUSION

APPENDIX - Selected Futures Columns

Index

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The Wiley Trading series features books by traders who have survived the market’s ever changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional, or somewhere in between, these books will provide the advice and strategies needed to prosper today and well into the future.

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Copyright © 2009 by Abe Cofnas. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:Cofnas, Abe, 1950- The Forex options course : a self-study guide to trading currency options / Abe Cofnas. p. cm. - (Wiley trading series) Includes index.

eISBN : 978-0-470-46620-9

1. Foreign exchange options. 2. Foreign exchange market. 3. Options (Finance) I. Title. HG3853.C638 2009 332.4’5-dc22 2008018570

Preface

This book is designed to help forex traders build upon their knowledge and skills in trading forex and apply it to forex option strategies.

There are important differences between spot forex and options trading. In contrast to the spot forex trader, the options trader puts on trades “anticipating” a move over a longer duration of time. Whereas the spot forex trader concentrates on trades to achieve profits intraday and even intrahour, the option trader is liberated from the slavery of the screen and can set and let fundamental and market forces generate the intended profits. Position trading strategies become an important part of the repertoire of the forex option trader.

Forex option trading also is accompanied by an entirely different mind-set from spot trading. While neither one can claim superiority over the other, there are significant consequences to pursuing a forex option mind-set. The differences between the forex spot and option trading perspectives generate different strategies and goals and also a different need for information. For example, the spot trader often seeks frequent small moves and focuses on intraday and intrahour charts, avoiding the need for constantly absorbing information on fundamentals and the big picture. In contrast, the forex option trader’s decision to put on a trade is a result of a more intense evaluative process where the trade fits optimal conditions, since forex option trading is less frequent than spot trading. Forex option trading requires more experience evaluating broad market conditions and top-down analysis, while forex spot trading requires greater focus on trading itself with precision management of moment-to-moment trading.

The presence of high leverage exists in both spot forex and options on forex trading. However, the main difference is that many of the forex option techniques explored in this book provide high leverage without the associated risks of margin calls.

This book is different from the option literature that is available—a great deal on the Internet—because it places the concepts of option trading in a strict forex environment with examples to guide the reader. The book is also designed to prepare the forex trader for new option variations and intermarket choices for shaping and putting on forex options. Those individuals who are familiar with equity option or futures option trading will find the application of basic option principles to be straightforward. But it should be clear that in the coming years forex trading is going to occur in many venues. The rise of exchange-traded funds (ETFs) provides a rich new source of data on forex option price action. Those traders having equity platforms can immediately trade forex options through their equity accounts because of the increasing availability of currency instruments such as those currency options provided at The International Securities Exchange (ISE) and Philadelphia Stock Exchange (PHLX) .

It’s also important to note that those forex traders staying in the spot side can use the access through equity accounts to analyze patterns relating to currencies and commodities. The forex option trader will improve the odds of winning by tapping into more than one market for information. The ETFs will certainly become a tool for trading. The futures markets are also improving their forex option product line. The CME’s forex product line is expanding and offering new trading opportunities in options. The Chicago Board of Trade’s (CBOT’s) options on federal fund futures and the more recent binary options on federal funds provides unprecedented opportunities for forex traders to gain market knowledge about the probabilities of Federal Open Market Committee (FOMC) moves—without needing to trade those instruments. But this book is also designed to prepare the forex trader for these and even newer variations in forex options that are coming to the market. Binary options allowing traders to play touch, no-touch, double-touch, and double-no-touch are becoming available worldwide and in the United States. These binary options will revolutionize the ability of people to trade forex with limited risk.

For the serious forex trader, considering forex options and becoming skilled in forex options analysis is advisable because it is increasingly apparent that the world is, more than ever, interconnected. Many of us have heard the phrase, “No man is an island.” Today, we can state that no market is isolated. Equity, commodity, and debt markets cannot be totally separated. They all tap into each other and generate a global liquidity market that fuels buying and selling. Today’s trader in any of these realizes that currency price movements reflect more than a determination of the value of the dollar versus another pair. The forex market reflects the totality of market psychology versus the prospects of growth versus inflation.

The goal of this book is to provide a “get started” manual for understanding and trading forex options, from the basic plain vanilla calls and puts to the intriguing first-generation exotic binary options. Our goal is to provide the reader access to the right information to make the most well-informed decision. The challenge of trading forex is among the most exciting of all the markets, and this book is designed to help the trader meet those challenges.

Acknowledgments

This book became a reality because of the contribution of many people. Foremost are my students in forex who enabled me to evolve a deeper understanding of forex trading and in particular the potential benefits of understanding forex option trading. In the writing of this book, superderivatives.com deserves special recognition. Their advanced analytics engine was made available to me for the purpose of writing this book and it offered a rare opportunity to present dimensions of analysis that is usually attributable to institutional research. Udi Sela deserves acknowledgement for providing professional forex option trading insight and expertise to ensure that the strategies and tactics described had validity. The strategies and tactics however, reflect the author’s judgment only. My student and colleague Reynolds Lee deserves recognition for generating a great deal of the charting in the book. His expertise in visual numerics is world-class.

Lastly my wife, Paula, needs to be acknowledged for providing an environment conducive to the work required to complete the manuscript.

About the Author

A be Cofnas has been the forex trading columnist of Futures magazine since 2001 and has written over 10 columns. He has been a leader in designing and delivering forex training courses. He has conducted seminars in the United States, London, and Dubai as well as online training in all time zones. Mr. Cofnas founded www.learn4x.com in 2001 as the desktop forex trading industry started to provide education and training in this field and has been a consultant designing forex education and training material to many firms. He has since developed forex coaching with advanced performance analytics. He is head forex coach at secretsoftraders.com. Recently he founded fxdimensions.com, a forex proprietary trading team, and is the founder of www.currencygames.com, a forex trading game company. He has been in the financial service industry as an equity broker, futures, and forex trader since 1990.

Mr. Cofnas holds two master’s degrees, in political science from the Graduate School of Political Science, University of California, and in public policy from the University of California, Graduate School of Public Policy. He currently lives in Longwood, Florida, with his wife, Paula, where he conducts research on artificial intelligence programs using cellular automata and enjoys digital photography. He has a daughter, Paige, and a son, Paul.