HI Traders, Can anyone name a broker or two who offers trading in vanilla OTC forex options and also allows automatic stop loss orders. I would sure love to be able to place stop loss orders to liquidate my options positions in the event of a sudden adverse move in the underlying. As it is, I have to watch the market like a hawk, which of course is a problem with forex, due to the need for sleep and an occasional movie. Any other suggestions for setting up an automatic stopping protocol using other software, etc.? Thanks so much traders, Steven
You can trade the ISE FX options with a regular options broker such as thinkorswim, optionsxpress, interactivebrokers and etc, who allow not only stop orders, but also more advanced types. The drawback is that they don't trade 24h.
You could always hedge the position with the underlying when you are not available to watch the market. . . use futures contracts to offset your option trade Use the full-size CME contract like EC or JY - spreads are smaller than most FX shops and only about $5 R/T commish at most brokers. Also, if/when the market moves against you briefly but temporarily, you could snag some ticks the opposite direction before your option position pivots back the right way - and if you cut the trade, the futures gains will replace some of the lost premium from buying the options.
Thanks for your good leads, friends. I just thought of another solution to my little problem of getting stops automatically filled: One could use the so-called exotic forex options, particuarly the knock-outs. With KOs, the option automatically expires worthless if at any moment a preset level is touched or breached, making it a defacto stop order. I love these exotic options!
Many forex brokers offer some exotic options. Saxobank offers more than any other I have found so far, but at least some types are offered at IG Markets, Oanda, FXCM, and numerous others. An internet search will yield enough leads to keep one occupied for days researching them. With these exotic "knock-out options," the entire premium paid is forfeited immediately when the market attains to the pre-established barrier level. When that barrier is hit, the option is automatically erased, along with any money paid for it. I like the idea of using automatic stop losses on forex options to defend an imminent loss in a short position. I for one probably wouldn't bother stopping out a long option, automatically or otherwise, as I only buy options with premiums I'm comfortable losing. The whole point of buying options to speculate on the underlier is to cap risk without being subject to stop-loss orders that automatically liquidate a position for good. Thus, stops are redundant for long options, I think. For shorts, though, they would really help to keep losses to a certain acceptable, preset level.