FX Vanilla Options
A Vanilla option is a derivative financial instrument that gives the buyer the right, but not the obligation, to either buy (Call) or sell (Put) a predefined notional amount of a currency cross at a pre-defined price (Strike price) at a predefined date in the future (Expiry date). The seller of the option has a corresponding obligation to fulfil the transaction should the buyer decide to exercise his right.
Please note that short positions in Vanilla options carry more risk than long positions as the potential loss is not limited. When holding a long position in an option, the potential loss is limited to the premium paid.
FX Touch Options
A Touch option is a type of exotic option that gives the buyer a pre-determined payout either once a spot price of a currency cross reaches or surpasses a predetermined barrier (Trigger price) – One Touch or if spot never reaches the trigger level before the expiry – No Touch. These types of options allow you to set the Trigger price, the time to expiration and the payout to be received.
Please note that short positions in options carry more risk than long positions as the potential loss could amount to the total payout, whereas in the case of a long position, the potential loss is limited to the premium paid.
Additional information regarding FX Options can be found here.