posted August 02, 2005
In early August, currency brokerage Oanda launched a currency options product that expanded the small but
growing field of forex trading firms offering forex options to retail traders.
First of its kind: intra-day, customer-defined currency options.
Breaks from limitations and complexities traditionally associated with options trading
For FX market investment, as well as hedging currency risk and currency positions
Fully integrated into OANDA's FXTrade platform
OANDA, a pioneering currency trading and information company, today announced the launch of a new product called OANDA BoxOption. BoxOption breaks away from the limitations and complexities traditionally associated with options trading, supporting intraday currency options and allowing the customer to define their own options on a graphical user interface in any granularity and for any time frame as short as 5 minutes.
BoxOption is an exotic cross between a binary option and a corridor option. Traders use a computer cursor to draw boxes around expected future price targets or resistance or support levels in an intuitive way on a graphical user interface, request an instant price quote from OANDA, and then buy the option at their discretion. Both hit-boxes and miss-boxes are supported. After purchasing the option, customers can observe the exchange rate progression in real time.
The customer's return is determined by the size and position of the box - the lower the probability the box will be hit (or missed), the higher the return. If the exchange rate crosses a hit-box, the customer receives the fixed return for each $1 invested. There is no return if the exchange rate "misses" the hit-box. Conversely, if the exchange rate misses a miss-box then the customer receives the return. Unexpired BoxOptions can be sold back to OANDA at the displayed resale value.
"This is the first and only product of its kind in the financial marketplace," said Michael Stumm, president of OANDA. "BoxOption provides both professional and private investors with a powerful new derivative for which they can do any number of things, from hedging exchange rate risk and currency positions, to direct investing in the movement of the currency markets."
The global currency markets have a daily turnover of 1.9 trillion USD. Approximately 90 percent of this volume is intra-day with traders opening and closing their positions within the same day. BoxOption enables intra-day traders to hedge their risk. The maximum loss for the trader is the price of the box with a predetermined return in case of a hit or miss. BoxOption can be bought in periods ranging from as short as 5 minutes to up to 50 days and is currently available at boxoption.oanda.com.