Contracts For Difference (CFDs) Are Specialised And Popular Over The Counter (OTC)
Contracts For Difference (CFDs) are specialised and popular Over The Counter (OTC) financial derivative products which enable you to trade on the price movement of financial assets Indices Futures Commodity Futures Cryptocurrency, Shares and Exchange Traded Funds. They enable clients to trade freely without actually owning the underlying asset or acquiring any rights or obligations in relation to the underlying asset. The main benefit of trading CFDs is the flexibility to trade against the price movements without actually buying or selling the physical instrument.
Acexliquidity ’s CFDs derive their price from the underlying asset. You can trade CFDs if you believe the price of a financial instrument is likely to go up in value (strengthen) and if you think it is likely to go down (weaken). Your profit or loss in online CFD trading is determined by the difference between the price you buy at and the price at which you sell.
At the end of the day, it is considered a safe investment in fact, for an option buyer, they are far less risky than trading the underlying instruments. For a seller, the downside risks, too, are less than that of being wrong on a spot trade, as the option seller gets to set the strike price according to his risk appetite, and he earns a premium for having taken the risk. Options do require an initial investment of time, to get to know the product. In addition, options can be used to hedge spot positions, and as a result, risks are limited to the premium amount. For instance, if you have a long position on an asset, such as a stock, you can buy put options to hedge that underlying position. Put options rise in value when the underlying asset’s price declines. So, if your long spot market position is generating a loss, your put option position will generate profits, effectively protecting you against market swings.
Perhaps the most unique advantage of options is that one can express almost any market view, by combining long and short call and put options, and long or short spot positions. The trader is bearish on USDJPY, but not sure? He can buy a put option for his target expiration date, sit back and relax. Whether USDJPY goes up or down tomorrow, he is safe in his position all the way to the expiration date. If he turns to be right, spot is lower than the strike price by at least the premium value, he will earn profits.
Like any instrument, trading options has its risks and potential losses. However, there is a major difference between trading spot and trading options. In spot trading the trader can only speculate on the market direction – will it go up or down. With options, on the other hand, he can execute a trading strategy based on many other factors – current price vs strike price, time, market trends, risk appetite, and more, i.e. he has much more control over his portfolio, and therefore more room for manoeuvre.
A major risk in trading financial derivatives is volatility. Volatility may occur as a result of various factors, such as major news and events, that have a direct impact on the underlying asset’s price. Strangles and Straddles are the most efficient options trading strategies applied for volatility trades. Strangles are applied when there is a directional bias, while Straddles are applied when the expected price direction is unclear. In both strategies, though, options traders ensure that their speculative bets are hedged. The Strangle and Straddle strategies can be applied in the following ways:Foreign exchange, more commonly known as Forex or FX, relates to buying and selling currencies with the purpose of making profit off the changes in their value. As the biggest market in the world by far, larger than the stock market or any other, there is high liquidity in the forex market. Therefore, the forex market attracts many traders, beginners and experienced alike.
With approximately $4 trillion USD traded in the market every day, the forex market has the highest liquidity in the world. Basically, this means that one can buy almost any currency he wishes in high volumes while the market is open. The forex market is open 24 hours, 5 days a week – Monday to Friday. Trading begins with the opening of the market in Australia, Asia, Europe to follow and then the USA until the markets close.
Traders will apply short strangle and short straddle strategies when they expect the implied volatility of the underlying asset to be low. In a short strangle, a trader buys both call and put options with similar expiry times, but different strike prices. In a short straddle, a trader will sell both call and put options of the same underlying asset with similar expiry times and identical strike prices. In both scenarios, profits will be generated if the underlying asset’s price ranges or does not make significant movement in either direction.
Options are a great tool for any trader who invests just a little time to understand how they work. Acexliquidity offers a full education section accessed directly from the trading platform
For an experienced and aggressive trader, options can be used in a myriad of ways. For the beginner, or a more conservative trader, long options strategies such as buying options and option spreads, offer a limited risk entry into the market. By using the products and tools offered on the Forex TemplateOptions platform wisely, this flexibility generates more possibilities for making profits.
Acexliquidity Options is not only a leading platform for trading options, but also one that was built with the client in mind. The platform has embedded tools that are Forex Templateilable to all clients, and their purpose is to guide and assist you every step of the way. Moreover, the platform is simple to understand and use. This is done, amongst other ways, by allowing you to shape the display and tools based on your desire, and thus create the platform to help you succeed.
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