Home » Finance » Currency Trading

Spot Trading in Forex

Aug 17, 2007
This trading is one of the two options and the one which offers traders the flexibility. There are two styles within the spot trading too. They are the traditional option and then the SPOT option which stands for Single Payment Option Trading.

The traditional option let the buyer purchase a contract to buy the required number of lots at a time and price of mutual choice. This is slightly different from the stock market where the opted lots are always bought and sold on standard settlement cycles. This is follows the over-the-counter nature of trading of forex. When option expires and the set price is not attained, the buyer only pays the options seller the premium which equals the difference between the expiration and options price. If the price hits the set price, buyer gais the lots and can sell them off for profit in the cash market. The premiums payable to the options seller is a little higher here than that of the SPOT trading contract.

Single Payment Option Trading- SPOT
SPOT trading is pretty simple and straightforward. The seller offers a price scenario; say for example EURO/USD will cut through a particular price within a specified period and seeks price offers. If the price break comes through, the seller immediately gets cash deposited into his account.

SPOT trading is especially attractive to traders because of the advantages inherent within it.
1. You stand to get the cash if your call is right otherwise you loose only your premium.
2. SPOT offers a number of different choices and not just one fixed to opt for unlike in traditional options trading.

But Why Traders Prefer SPOT?
Out of the appealing reasons some of them are listed out here.
1. Your downslide is protected to the limit of your premium which is the paid up value of the lots.
2. Payment needed to make is lighter than the cash market.
3. The biggest advantage is the freedom to set the prie and expiration date.
4. Traders can hedge the SPOTs against cash positions and minimize risk
5. When you anticipate fundamental changes to a currency you need not put at stake your entire capital to enter into open positions.

There are certain downsides for SPOT trading in forex too without which I suspect everyone would be trading SPOT market rather than cash market.
1. Premium is a function of strike price and date so the risk /reward ratio is variable
2. You can't change mind midway and trade the SPOT options unlike traditional options or cash market, so predicting exact price and date could be risky.

When entering into positions keep in mind the time function as longer periods load higher premiums.
About the Author
Jason Uvios writes about "Spot Trading in Forex" to visit: foreign language translation , foreign exchange markets and forex trading .
Rating:
Please Rate:
(Average: Not rated)
Views: 214
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Buying
    • Selling
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources