strangle or stradle on FORX markets?

Question

is it possible to do strangle or stradle on FORX/currency markets?

thanks

Answer 1

Sure, why not? There are also other alternatives in Forex than elsewhere.

There are two primary types of options available to retail FOREX traders. The most common is the traditional call/put option, which works much like the respective stock option. The other alternative is single payment option trading--or SPOT--which gives traders more flexibility.

Traditional Options
Traditional options allow the buyer the right but not the obligation to purchase something from the option seller at a set price and time. For example, a trader might purchase an option to buy two lots of EUR/USD at 1.3000 in one month; such a contract is known as a "EUR call/USD put." (Keep in mind that, in the options market, when you buy a call, you buy a put simultaneously--just as in the cash market you buy one currency and simultaneously sell another.) If the price of EUR/USD is below 1.3000, the option expires worthless, and the buyer loses only the premium. On the other hand, if EUR/USD skyrockets to 1.4000, then the buyer can exercise the option and gain two lots for only 1.3000, which can then be sold for profit.

Since FOREX options are traded over-the-counter (OTC), traders can choose the price and date on which the option is to be valid and then receive a quote stating the premium they must pay to obtain the option.

There are two types of traditional options offered by brokers:

American-style – This type of option can be exercised at any point up until expiration.
European-style – This type of option can be exercised only at the time of expiration.

One advantage of traditional options is that they have lower premiums than SPOT options. Also, because (American) traditional options can be bought and sold before expiration, they allow for more flexibility. On the other hand, traditional options are more difficult to set and execute than SPOT options. (For a detailed introduction to options, see Options Basics Tutorial.)

Single Payment Options Trading (SPOT)
Here is how SPOT options work: the trader inputs a scenario (for example, "EUR/USD will break 1.3000 in 12 days"), obtains a premium (option cost) quote, and then receives a payout if the scenario takes place. Essentially, SPOT automatically converts your option to cash when your option trade is successful, giving you a payout.

Many traders enjoy the additional choices (listed below) that SPOT options give traders. Also, SPOT options are easy to trade: it's a matter of entering the scenario and letting it play out. If you are correct, you receive cash into your account. If you are not correct, your loss is your premium. Another advantage is that SPOT options offer a choice of many different scenarios, allowing the trader to choose exactly what he or she thinks is going to happen.

A disadvantage of SPOT options, however, is their higher premiums. On average, SPOT option premiums cost more than standard options.

SPOT options allow you many choices:
Standard options.
One-touch SPOT – You receive a payout if the price touches a certain level.
No-touch SPOT – You receive a payout if the price doesn't touch a certain level.
Digital SPOT – You receive a payout if the price is above or below a certain level.
Double one-touch SPOT – You receive a payout if the price touches one of two set levels.
Double no-touch SPOT – You receive a payout if the price doesn't touch any of the two set levels.

Answer 2

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