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Richard Berry - Updated
| Name | Logo | Currencies | Established | GMG Rating | Customer Reviews | CTA | Feature | Expand |
|---|---|---|---|---|---|---|---|---|
 | Currencies 100 | Established 1982 | GMG Rating | Customer Reviews | Visit Broker Capital at risk | Features:
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 | Currencies 84 | Established 1992 | GMG Rating | Customer Reviews | Visit Broker Capital at risk | Features:
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✅Methodology: Our expert team chose the best currency options brokers based on:
- 30,000 votes and reviews in the annual Good Money Guide Awards
- Our reviewers’ own experiences testing the FX options accounts with real money
- In-depth comparison of their stand-out features
- Good Money Guide’s exclusive interviews with the currency option company CEOs and senior management
What Are Currency Options?
OTC FX Options give you the right, but not the obligation to buy a certain amount of currency at a certain price, on a certain date in the future.
OTC (over-the-counter) FX Options can help protect you from foreign exchange price fluctuations between two currencies.
This can benefit currency traders because if the currency rates move against your position, you do not have to proceed with the transaction.
They can also benefit those looking to transfer currency internationally as you can benefit if the rates move in your favour.
Are Currency Options A Good Idea?
Here is a round-up of the advantages and disadvantages of using a currency broker versus your bank :
Pros
Options differ from currency forwards where you buy currency for a specific date in the future and are locked into the deal.
With OTC FX options, you pay a premium for the right to buy the currency. If you change your mind, you don’t have to.
Your risk is limited to the cost of the premium you paid for the option to do so.
Advantages of currency options:
- They are very cheap to trade
- They are available on or off exchange
- Risk is limited to premium (if you are a buyer)
- Very high potential returns versus risk
- Lots of strategies to speculate on volatility and price movement
Cons
Although options can be a limited risk financial product there are still downsides.
Firstly, being an OTC (Over The Counter) product there is no centralised exchange, a you are contracting with your broker. In most circumstances, the broker will hedge the position and mark up your premium. But the financial security of your broker is something to be considered.
Secondly, if you are buying an option you risk is limited to the price you’ve paid for your premium. But if you are selling options then your losses are potentially unlimited. So it’s vital that you fully understand what exposure your option may have.
Disadvantages of currency options:
- They can be illiquid
- Quickly become worthless
- Risk is potentially unlimited (if you are a seller)
✅ FCA Regulation
Good Money Guide only recommends currency options brokers that are FCA regulated.
The FCA is the Financial Conduct Authority and is responsible for ensuring that UK FX options brokers are properly capitalised, treat customers fairly and have sufficient compliance systems in place.
They are also backed by the FSCS (Financial Services Compensation Scheme).
Who Should Use OTC FX Options?
The short answer is only those that understand them. If you don’t, learn about whether they are the right option for you and consider carefully before you commit, speak to a professional currency broker if you are not sure.
If you do they can be a valuable addition to any corporate hedging strategy. Currency traders can use OTC FX options for speculation and some forex brokers will offer them on an execution only basis. If you are using a currency broker for hedging purposes they may be able to provide you with some strategy advice.
In general, though, currency options should only be used by sophisticated professional investors or corporate clients who fully understand the risks. Also, there are plenty of alleged experts out there who are not properly regulated and claim to have experience. The only brokers that are allowed to offer OTC FX options in the UK are regulated by the FCA. You can check a brokers regulator status on the FCA register here.
Here’s more information on why currency hedging strategies are important.
Hedging
You can hedge currency exposure with a currency broker, this is a more appropriate for businesses wanting to reduce the amount of currency exposure they have and is a good tool for budgeting and locking in profit from current or upcoming revenue.
Speculation
Or you can speculate on the currency markets through a forex trading platform. Speculating via currency options can be both very low risk (if you are buying puts and call) or very high risk (if you are selling or writing puts and calls). It is a very complex form of speculation and only for experienced investors.
How To Choose A Currency Options Broker
Of the currency options brokers we compare, only Corpay offers physical currency options for taking delivery of foreign currency for transfers and international payments. Other providers we have compared like Saxo Markets and Interactive Brokers do offer currency options, but more for speculation than hedging currency exposure.
The main things to compare when choosing a currency options provider are:
- Currencies – how many currencies can you buy and sell options on
- Transfer size – what is the minimum amount you can transfer and deposit
- Account types – what type of accounts do they offer?
Currency Option FAQs
The two types of currency options are put and calls. You buy puts if you think the market will go down. You buy calls if you think the market will go up.
To trade or hedge with currency options follow these steps.
- Choose a currency options broker based on whether you are speculating (Interactive Brokers) or hedging (Corpay).
- Buy calls if you want the market to go up.
- Buy puts if you want the market to go down
- You will need to deposit funds to pay for the premium
- You then need to decide if you want the option to go to expiry (where you take delivery of the currency) or sell it early (for either a profit or a loss).
Yes, currency options are one of the simplest and cheapest ways to hedge currency exposure as you only pay for the premium (value of the options) and your risk is limited to that if you are buying options.
The two costs involved when buying currency options are the option premium and your broker’s commission. Sometimes with OTX fx options, a broker’s commission will be worked into the premium (but they still charge for their services).
Richard Berry
This article contains affiliate links which may earn us some form of income if you go on to open an account. However, if you would rather visit the currency options brokers via a non-affiliate link, you can view them directly here: