Difference between future option and spot option trading


Another thing to note is that these two charts are nearly identical because the British Pound is the base and the US Dollar is the quote. This is not always the case! This is because in the spot market the USD is the base while the Yen is the quote. When looking at the futures market, basically they are switched; the Yen is the base and the Dollar is the quote. Noticing that the USDJPY had a small supply zone while at the same time the Yen futures chart was in demand could have led you to take a trade on either symbol because they both lined up.

This is another type of confirmation for those of you who like that sort of thing. Obviously with an inverse chart the prices will be wildly different, this is merely an easy math equation. Keeping it simple is my preference!

Another interesting difference in spot forex vs. So, futures can be cheaper to trade! As you may know from your previous trading, not every pair has the same value per pip, which is the same in the futures market.

So the big take away here is that different symbols will have different margin requirements, and they will also have different dollar values on the minimum moves pips or ticks. Many traders will choose to open one account to trade one asset class, be it spot forex or futures. If you choose to open a forex account only, you will have access to many different currency pairs to choose from. While these obscure pairs might look good to you on a spot forex chart, trying to trade them in a futures account might be a problem.

The main reason is the lack of volume, or even possibly the lack of the pair even trading in the futures market! If you choose to open a futures account, you will have access to the major currency pairs, in addition to other contracts like wheat, gold, oil, etc. But access to all of the currency pairs will be limited. So there you have it traders!

Highest price that any buyer is willing to pay per tonne at any given period. Bid price could also be referred to as give price or buying price. Normally the more liquid the product, the smaller the spread. A general upward movement in a market over a sustained period of time. Call Option — Asian: A contract that entitles the holder buyer to receive the positive difference between the exercise price and the spot price.

Compare with Put option. A Clearing House becomes the counterparty for both the seller and the buyer in a trade. This helps to reduce the market risk for trading firms. A derivative derives its value from the price or level of an underlying asset or measurement, such as a bond, loan, equity, currency, commodity, index, published interest rate or a combination of the above.

The regulation introduces requirements for OTC derivatives transactions which meet the eligibility criteria to be cleared through central counterparties and all OTC derivatives transactions to be reported to trade repositories. The exercise Price in an option also called strike price is the price at which the option value in the contract will be set at the time of settlement.

The difference between the Exercise price and the spot price defines the value of the Option. The day on which an Option is subject to expiry for cash settlement. A trade that has been completely executed- i. A buy or sell trade that instructs the broker to either fill the entire order immediately or cancel the trade.

A binding offer to buy or sell by a Trade Member. A Firm order is tradable without further confirmations. Financial contract with cash settlement between two named and identified Trade Members with counterparty credit risk. Cleared financial contract where a clearinghouse acts as central counterpart in all contracts guaranteeing the settlement. Good For the Day: Market or Limit order that remains active only until the end of the trading session.

Market or Limit order that remains active until the trade is cancelled or the trade gets filled. A trading strategy which is designed to reduce or mitigate risk. A second transaction is entered into to offset the risk of the first. A measure of price fluctuation over time. It uses historical daily, weekly, monthly, quarterly and yearly price data to empirically measure the volatility of a market or instrument in the past. Volatility implied by the market price of the option based on an option pricing model.

A position which has intrinsic value, for example a portfolio acquired at a rate which is more advantageous than current market rates. A single number calculated from the total value of a basket of prices, example Fish Pool Index. A buy order that instructs a broker to only buy at or below a specified price, or a sell order that instructs a broker to only sell at or above a specified price.

This type of order insures that you never pay more than you intend, or conversely sell for less than you want. The National Association of Securities Dealers Automated Quotations, more commonly known as Nasdaq, is an all electronic exchange, which accounts for some of the highest trading volume in the world. Many technology companies choose to list on the Nasdaq. The sum of money or value of securities required to be transferred and maintained, in order to provide protection to the recipient of margin against default by a counterparty to a trade.

Nasdaq demands margin set as cash. Regulatory framework which aims to provide uniform regulations across the European Economic Area EEA for the financial and investment services sector. The uniform regulations facilitate the freedom of movement for goods, services and capital across the member countries in exchange for adhering to the European Union laws and policies.

An Asian option at Fish Pool is a contract traded in which the payoff is based on the difference between the exercise price and the monthly settlement price. The writer of an option receives a premium from the buyer holder.