Illustration:
A trader having a “Long” directions view on the Currency can buy a Call option or Sell a Put Option. Similarly a trader having a “Short” directional view on the Currency can Sell a Call Option or Buy a Put option. In case where Call or Put Option is being bought, the downside risk is limited only upto the amount of Premium paid, the upside is unlimited in this case. In case where Call or Put option is being sold, the Downside risk is unlimited and Upside potential is capped upto the Premium amount.
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