Exchange traded currency products - Offering retail investors access to new investment strategies

Are exchange traded FX currency products set for new growth? Frances Maguire looks at what investment strategies exchange-traded currency futures and options offer retail investors looking to diversify and enhance their trading strategies.

First Published: e-Forex Magazine 33 / Retail Forex Client / October, 2008

With the recent change in direction of the US dollar, there is a distinct likelihood that investors might seek to add currencies as an asset class to their portfolios, and certainly the exchanges have been long designing currency contracts to attract the self-directed retail investor. By making the currency contracts smaller than those targeted at institutional traders and designing and presenting them to look like the spot FX market, exchanges hope not only to woo retail investors away from the OTC market but also to make the switch as easy as possible. Dan Carrigan, vice president of Nasdaq OMX PHLX, says that the exchange’s World Currency Options® deliver an investment tool which can be used in the same way as equity option strategies, i.e. call and put spreads to capture price direction with pre-defined risk, while World Currency Futures® offered by the Philadelphia Board of Trade (PBOT) offer a “retail-sized” approach to currency futures trading – and without the...continued

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