Vanilla Calls and Puts give the buyer unbalanced exposure to the underlying FX position. Simply put, once a buyer has paid for an option, he owns the right to enter the underlying spot position on the expiration date if it is profitable. The buyer has no obligation to open the underlying spot position if it would be unprofitable. If the underlying spot position increases in profitability, so does the option, without limit.
This is different to Binary Options, which give a fixed payoff if expiring in profit. Typically, Binary Options are very short-dated, offering only intraday expiration. Our Vanilla Calls and Puts offer trading exposure for any length of time, from as short as one day, to as long as one year. In both Binary Options and Vanilla Options, if the underlying market has moved against the option buyer, the maximum loss is the cost of the option.
Vanilla Calls and Puts are similar to Insurance products. In return for a paying premium, the owner of the contract owns the right to an underlying position and earns a profit if he makes correct speculation about its ultimate direction. But if the owner is wrong, he will only lose the premium paid. Uniquely, a trader can choose to take the role of the insurance company, and sell (“write”) options. If the market does not move against the option seller, and the option finishes out of the money, he will keep the option premium. If the market moves in favour of the buyer, the seller will be exposed to potentially unlimited loss, offset only by the premium earned.