The advantage of buying options is the ability to create limited risk trades and strategies without having to utilize a stop-loss order, hence you avoid stop-outs (as long your account equity supports the option buy price). Furthermore, you risk is limited but your profit is unlimited.
Call and Put options on MT4 can be used to trade currency market direction. If you expect a currency pair to rise you may buy a Call option and if you expect a pair to fall you may buy a Put.
Two things you need to consider when buying options; the strike price and the expiry date. Through buying an option you are reserving a price in the market and that reserved price is known as the strike. The value of an option depends on the market price level relative to the strike price. The more the strike can 'beat' the market the more the option is worth. Secondly, options with a longer expiry will cost more but they also give more time for your outlook to happen, this could be described as 'buying more time'.
Trade an uptrend
You would buy a Call to trade an uptrend because a Call gives the owner the right to buy a currency pair at a certain market rate. This certain rate is the strike rate. Once you are holding the option, the more the strike can 'beat' the market the more valuable your option becomes.
For example, the image below shows a weekly (w) EUR/USD Call with a strike of 1.0900. If you buy this option you will hold the right to buy EUR/USD at 1.0900 until the end of the trading week. The option costs 0.00414 (Ask price) to buy.
Note that, 0.00414 = 41.4 pips
If EUR/USD is trading above the strike rate by expiry the option will have value because your option is allowing you to buy at a better rate. Say, EUR/USD is trading at 1.1000 your strike of 1.0900 allows you to buy at a much cheaper rate (100 pips cheaper in fact!). The more the market rate rises above your strike the more valuable the Call option becomes.
When your options value is higher than the price you paid for it, you may sell it for a profit. On the other hand, if EUR/USD is trading below the strike rate at expiry, the Call option has no value and a loss is incurred. Your loss is limited to the price you initially paid for the option (in this case that is 41.4 pips).
In summary, as the market rate moves UP, above the strike rate,the call option's value increases and if the market moves DOWN, expiring below the strike, a loss is incurred. The loss is limited yet the position cannot get stopped-out. This may be useful to trade a volatile uptrend.
Trade a downtrend
You would buy a Put to trade a downtrend because a Put gives the owner the right to sell a currency pair at a strike rate. Once you are holding the option, the more the strike can 'beat' the market the more valuable your option becomes.
For example, the image below shows a weekly EUR/USD Put with a strike of 1.0800. It would cost you 0.00337 (Ask price) to hold the right to sell EUR/USD at 1.0800 until the end of the trading week.
Note that, 0.00337 = 33.7 pips
If the market rate is below the strike rate by expiry the Put option will have value because it allows you to sell at a better rate. Say,EUR/USD moved to 1.0700, you have the right to sell at the higher rate of 1.0800. The more the market falls, the more valuable the Put option becomes.
When your options value is higher than the price you paid for it, you may sell it for a profit. On the other hand, if EUR/USD is trading above the strike rate at expiry, the Put option has no value and a loss is incurred. Your loss is limited to the price you paid (in this case that is 33.7 pips).
In summary, as the market rate moves DOWN, below the strike rate,the Put option's value increases and if the market moves UP, expiring above the strike, a loss is incurred. The loss is limited yet the position cannot get stopped-out. This may be useful during a volatile downtrend.
The possibilities through buying options don't stop there, they can also be used to trade strategies such as straddle and strangles allowing investors to take advantage of increases or decrease in market volatility. These will be explained in future articles.
Editors’ Picks
EUR/USD gathers traction, approaches 1.1800
EUR/USD manages to reverse Tuesday’s pullback, advancing to two-day highs near the 1.1800 hurdle in the latter part of Wednesday’s session. The pair’s decent uptick comes on the back of the modest retracement in the US Dollar, as investors continue to closely follow developments on the trade front and news from the White House in the wake of President Trump’s SOTU speech.
GBP/USD challenges multi-day highs near 1.3530
GBP/USD leaves behind the previous day’s decline and regains fresh upside traction on Wednesday, surpassing the 1.3500 barrier in a context of a modest decline in the Greenback and a generalised improved mood in the risk-linked space. Meanwhile, the US tariff narrative continues to dictate the mood among market participants after Presidet Trump’s SOTU speech failed to surprise markets.
USD/JPY Price Forecast: Bulls await move beyond 156.00 amid constructive technical setup
USD/JPY attracts some dip-buyers on Wednesday and seems poised to appreciate further. Delayed BoJ rate cut bets undermine the JPY and offset a weaker USD, supporting the pair. The technical setup also favors bullish traders and backs the case for further appreciation.
Editors’ Picks
EUR/USD gathers traction, approaches 1.1800
EUR/USD manages to reverse Tuesday’s pullback, advancing to two-day highs near the 1.1800 hurdle in the latter part of Wednesday’s session. The pair’s decent uptick comes on the back of the modest retracement in the US Dollar, as investors continue to closely follow developments on the trade front and news from the White House in the wake of President Trump’s SOTU speech.
GBP/USD challenges multi-day highs near 1.3530
GBP/USD leaves behind the previous day’s decline and regains fresh upside traction on Wednesday, surpassing the 1.3500 barrier in a context of a modest decline in the Greenback and a generalised improved mood in the risk-linked space. Meanwhile, the US tariff narrative continues to dictate the mood among market participants after Presidet Trump’s SOTU speech failed to surprise markets.
Gold remains bid and close to $5,200
Gold buyers are returning to the fold on Wednesday, targeting the $5,200 area and possibly beyond, after Tuesday’s corrective dip from monthly highs. The rebound in the precious metal comes as the US Dollar loses traction, with Trump’s SOTU speech offering little fresh direction and AI-related nerves continuing to ease.
Crypto Today: Bitcoin, Ethereum, XRP test rebound strength as ETF inflows return
Bitcoin, Ethereum and Ripple are gaining traction at the time of writing on Wednesday, amid persistent market doldrums. The Crypto King is up over 2% intraday, trading above $65,000 from the day’s opening of $64,058.
Nvidia earnings to influence AI trade and broader market sentiment Premium
For the last three years, Nvidia has been the engine of the AI boom, and now Wall Street is watching to see whether that momentum can keep going. High-growth stocks have been struggling to maintain their bullish trend in 2026.
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