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The best forex brokers for forex options trading in 2021 provide multiple trading tools and options products to help distinguish their offerings from the competition, in addition to being highly regulated and trustworthy.
Trading through a regulated venue provides greater confidence to traders that the pricing methodology and execution policies have a high level of integrity.
For example, forex traders in Europe can access exchange-traded forex options through regulated exchanges known as Multilateral Trading Facilities (MTFs). In addition, regulated forex brokers also offer options trading in the off-exchange market.
That’s why it’s crucial to only trade forex options with a regulated and trusted firm. All types of forex options trading should be considered high-risk investments.CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 65% and 82% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Best Forex Brokers for Options (Turbos)
Here's a summary of the best forex brokers for options (turbos) trading.
- Saxo Bank - OTC and exchange-traded options
- IG - OTC and MTF-listed options
- CMC Markets - OTC forwards and countdowns
- Interactive Brokers - US forex options
- TD Ameritrade FX - US forex options, US residents only
- Ava Trade - OTC options only, great options app
OTC and exchange-traded options
For traders that can afford the USD 10,000 minimum deposit (GBP 500 for the UK), Saxo Bank offers competitive pricing, excellent trading platforms, brilliant research, reliable customer service, and over 40,000 instruments to trade. Read full review
OTC and MTF-listed options - Visit Site
Regulated and trusted across the globe, IG offers traders the ultimate package of excellent trading and research tools, industry-leading education, competitive pricing, and an extensive list of tradeable products. This fantastic all-round experience makes IG the best overall broker in 2021. Read full review
OTC forwards and countdowns
CMC Markets is a globally trusted broker that delivers a terrific offering for traders thanks to excellent pricing, nearly 10,000 tradeable instruments, and the Next Generation trading platform, which comes packed with quality research, innovative trading tools, and powerful charting. Read full review
US forex options
Professional forex and CFD traders seeking a global multi-asset broker will find Interactive Brokers offers a sophisticated, institutional grade trading platform, and competitive fees. Read full review
US forex options, US residents only - Visit Site
With over 70 currency pairs to trade alongside a plethora of tools, research, and education, TD Ameritrade's thinkorswim platform provides US-based forex traders the ultimate trading technology experience. Read full review
OTC options only, great options app
AvaTrade is a trusted global brand best known for offering traders an extensive selection of trading platform options. Our testing found AvaTrade to be great for copy trading, competitive for mobile, mostly in line with the industry average for pricing and research, and a winner for investor education. Read full review
What are Forex Options?
All forex options are either puts or calls, similar to regular options. Holding a put option conveys the right to sell while holding a call option conveys the right to buy. Like regular options, forex options are a riskier investment.
- The holder (buyer) of a put option has the right to sell the underlying asset at a specified strike price on or before expiration. A put option is a bearish (short) position that profits when the cost of the underlying decreases.
- The holder (buyer) of a call option has the right to purchase the underlying asset at a specified strike price on or before expiration. A call option is a bullish (long) position that profits when the cost of the underlying increases.
The gallery below contains pictures of forex options featured on the best forex options brokers.
Forex options terms to know
Below are seven terms every trader should know before trading forex options:
- Strike Price - The price level the contract can be exercised at (i.e., exercise price)
- Time Value - The portion of the premium represented by any remaining time
- Spot Price - The current market price of the underlying asset
- Premium - The value of time remaining plus any positive difference between spot and strike price
- Break-Even Level - The difference between the Spot price and any time value
- Intrinsic - The positive difference between the strike price and underlying spot price
- Extrinsic - The negative difference between the strike price and the underlying spot price
Different types of forex options
Aside from differences related to where you trade forex options, there are also different forex options types beyond the plain-vanilla options, including more exotic currency options. Here is a basic course on options. Below are examples of varying forex option types:
- Average rate options
- Barrier options (turbo warrants, touch brackets)
- Swaptions (converts to a swap position)
- Currency warrants (long-term options)
- Binary options (Digital 100s)
Why trade forex options?
While not suitable for all investors, options can be attractive to forex traders due to their inherent properties not found in other forex instruments. Below is a list of some of the perceived advantages of why investors trade forex options trading:
- Pre-defined risk when buying options
- No chance of a margin call or getting liquidated (except for Turbo or Barrier options)
- Can be used to offset or fully hedge an existing position
- A combination of options can create highly specific trading strategies
- Have pre-defined time remaining until expiry
- Can be highly risky if selling options with undefined risk or buying low probability out-of-the-money options
What is a forex put option?
A put option is a bearish (short) position that profits when the price of the underlying decreases.
A trader who is expecting the price of the EUR/USD to fall by a specific date may purchase a put option with enough remaining time-value.
What is a forex call option?
A call option is a bullish (long) position that profits when the price of the underlying increases.
A trader who is expecting the price of a currency pair such as the EUR/USD to appreciate by a specific future date may purchase a call option. The option should have enough remaining time-value to cover the trader's forecasted time-horizon for that trade.
What are the different levels of forex options trading?
Selling puts or calls to open a position will generally require considerably more margin than buying puts or calls, and in the US, will require that traders get approved for that level of options trading, across the following four tiers:
- Level one options trading: Default level, includes protective puts and covered calls
- Level two options trading: Buying options (puts or calls)
- Level three options trading: Credit and Debit spreads (defined risk/reward)
- Level four options trading: Naked position (undefined risk)
What are some common strategies for options trading?
Depending on what you are expecting in the market for a given forex pair and time-frame, there are over a dozen popular strategies used to establish an options position with predefined risk in anticipation of specific market behavior related to price direction and volatility, some of which are listed below:
- A combination position includes more than one option in the same contract at the same time.
- A straddle (or strangle) combines writing (or purchasing) both a put and call at the same strike price (or different strike prices) and the same expiration date.
- A spread position is one where you are both the buyer and the writer (seller) of the same type of option, although strike price and expiry dates can be different.
How do forex options differ across brokers?
Forex options are financial assets that may vary in terms of the numerous rules and structures they follow, which can result in various levels of complexity. Below are some of the most common ways forex options differ across brokers:
- Broker or exchange execution policies
- Default contract sizes and specifications
- Type of option styles and products available
- Trading symbols for the same underlying currency
What are exotic forex options?
Some forex options lose value if the underlying spot price touches a barrier level, such as a turbo warrant (known as turbos, or touch brackets).
- For example, if a turbo call option trades at a level below its strike price (i.e., breaking its barrier), it becomes worthless, even if the price recovers before expiration.
- Meanwhile, other forex turbos can have a barrier level that is different than the strike price level. Furthermore, a Turbo may have a barrier that only activates at a specific time, such as after one touch.
Are forex options cash-settled?
Almost all forex options are cash-settled, where no delivery takes place. Thus, it can be convenient to trade these financial instruments in the same way investors trade non-deliverable spot forex (i.e., CFD trading).
Can retail traders buy forex options?
Certain forex brokers will require that you are a professional client to trade options, such as Digital 100’s (binaries). At the same time, other brokers may also offer FX Forwards, in addition to forex options and currency futures, and forex instruments available to retail traders (i.e., CFDs).
Are there risks involved in trading forex options?
All types of forex options trading should be considered high-risk investments. Whether trading out-of-the-money options that have a higher probability of expiring worthless and thus could be deemed “riskier”, or even when trading an option that is deeply in-the-money with lower-probability of expiring worthless. In all cases, forex options are risky, complex financial instruments, and even if you understand them well, they may not be suitable for everyone.
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For our 2021 Forex Broker Review we assessed, rated, and ranked 27 international forex brokers over a three-month time period resulting in over 50,000 words of published research.
Each broker was graded on 108 different variables, including our proprietary Trust Score algorithm. This innovative scoring system ranks the level of trustworthiness for each broker based on factors such as licenses, regulation and corporate structure (read about Trust Score here).
As part of our annual review process, all brokers had the opportunity to provide updates and key milestones and complete an in-depth data profile, which we hand-checked for accuracy.
Ultimately, our rigorous data validation process yields an error rate of less than .1% each year, providing site visitors with quality data they can trust. Learn more about how we test.
Forex Risk Disclaimer
"There is a very high degree of risk involved in trading securities. With respect to margin-based foreign exchange trading, off-exchange derivatives, and cryptocurrencies, there is considerable exposure to risk, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or related instrument. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses." Learn more.