Differences Between Spot Forex Trading And Traditional Trading There are two main types of foreign exchange options: the traditional calls and puts as well as the more flexible spot option. The difference between the traditional and spot for-ex trading is that with the latter, if the option works out, payment occurs right away or “on the spot”.
Traditional options give the buyer the right but not the obligation to purchase an option at a predetermined time and price. Since the currency Forex market has no central exchange, traders can choose the date until which their option would be valid (expiration) as well as the price. There are two different types of traditional options:
- European: the option can only be exercised on the date of expiration
- American: the option can be exercised at any point before and up to the date of expiry
SPOT is an abbreviation for Single Payment Options Trading and is generally more flexible than traditional option trading. Generally, the trader will input a market prediction into their f-x trading software and if the decision works in the favor of the trader, they will earn a profit and experience payout as soon as the results are observed.
The decisions are made based on streaming real time information which is updated regularly allowing the individual to make inputs based on the most current information. Generally traditional options have lower premiums, however if the scenario doesn’t go according to the prediction of the trader, the loss on the spot option is equal to the premium. Spot for-ex trading options are much more flexible in terms of payout offering many more possibilities such as One-Touch, No-Touch, Digital etc. There is great opportunity for profits in both, spot for-ex trading and traditional trading as risk is kept at a minimum (you can’t lose more than the premium); however, one must still research carefully which option choice is best for their trading style.