e-FX Options: Providing new profit and hedging opportunities for Retail Investors

The growth of electronically traded FX options by retail traders, both over the counter and on-exchange, is already taking off as more sophisticated retail investors look for new trading and hedging opportunities. In response, brokers and banks are rapidly developing e-FX trading platforms that support and educate investors about the different products and trading styles available, and FX options is being pitched as the fastest growing new revenue stream in FX.

The retail FX market is maturing and is now so crowded and competitive that FX dealers have become a commodity, differentiated only by the tightness of their dealing spreads. As industry competition further narrows dealing spreads and cuts deeply into profit margins, the marketplace is ripe for a profitable new product. The flexibility of customisation FX options bring, as well as the increased trading opportunities they offer, in both volatile and quiet markets, explain why this trend looks likely to grow. Furthermore, FX options not only answer the growing retail trader demand for new trading strategies but they are more profitable than conventional spot transactions and offer dealers more trades overall. Growing interest in options Michelle Gibson, executive director of ABN Amro and head of marketindex UK, says the increase in global risk aversion and increased volatility in the markets is driving the recent interest in options trading from retail FX investors looking for hedging opportunities in...continued

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