FX Option

An FX option is a contract that gives its buyer the right, but not the obligation, to exchange one currency for another at an agreed rate on or before an agreed date. The buyer pays a premium for that right; the seller keeps the premium and takes on the obligation to deliver if the buyer exercises. The agreed rate is the strike, the agreed date is the expiry, and the amount is the notional — those three, plus the currency pair, define the contract. Most currency options are agreed over the counter between banks and their institutional clients rather than on an exchange, which is why their prices are not public the way a spot quote is. They matter to someone who only ever trades spot for two reasons. The hedging that option positions generate flows back into the spot market, and the language of that market — implied volatility, skew, the expiry cut — turns up constantly in commentary about pairs. Whether options themselves are available on any particular retail account is a question for the broker's instrument list and the client's regulatory category, not something to assume.