Speculating with call options or put options

Foreign currency options can be used to take a speculative position.A speculative buyer may exercise the option or allow it to expire.The speculator will exercise the option when it is profitable to do so, that is, when the option is in the money.As the spot price of the underlying currency moves up, the speculative holder of a call option will obtain greater and greater profit.Potential profit is unlimited.However, if the spot price of the currency moves down, the holder of the option can allow it to expire.In this case, the holder’s loss is limited to the amount of the premium paid.Foreign currency put options can also be used for speculation.The speculator holding the put option hopes to sell the underlying currency at the strike price when the market price falls below the strike price.