ForexNewsNow – In addition to currencies, many online foreign exchange brokers offer their customers the opportunity to trade other financial instruments and commodities. Gold and silver make up two such commodities which can often be traded against the U.S. Dollar, and also against the Australian Dollar with some currency brokers.
While gold and silver trading is often offered when opening an online trading account, some online forex brokers require a higher minimum deposit to trade these commodities. Precious metals trading make up just one additional market forex brokers offer their clients, and other financial products currently offered by some online forex brokers include:
Many online foreign exchange brokers offer trading in crude oil, often making prices in a light crude grade like West Texas Intermediate, for example.
Oil trading is generally on a standard mini-contract and is quoted in U.S. Dollars. Forex brokers generally charge a flat per transaction commission on oil trades.
CFD or Contract For Difference Trading
Contracts For Difference or CFD trading allows traders to speculate on moves in a number of financial markets without taking on a position directly on the underlying asset. This benefit, combined with the fact that CFDs can be leveraged, has made CFDs an extremely successful financial product, although they are not currently available to U.S. residents.
CFDs can be traded by non-U.S. residents on:
- Stock Indexes – most world stock indexes can be traded, including DJ-30, Nasdaq 100, S&P500, FTSE, DAX-30, CAC-40 and the Nikkei
- Commodities – Gold, silver, crude oil, sugar, corn, wheat and soybeans
- Individual Stocks – the stocks of most of the world’s largest companies stocks can be traded using CFDs, including stocks that trade on European exchanges.
In addition to the above financial products and instruments, some online currency brokers offer trading in currency futures, as well as futures on other commodities. Since they are usually traded for speculative purposes, traders seldom take futures contracts to term and often liquidate positions before the last trading day.
Most futures contracts offered by online forex brokers consist of OTC futures or Over the Counter futures, unless the broker provides access to electronic dealing in exchange traded futures. These OTC futures contracts are typically cash settled on the delivery date and so the trader does not make or take delivery of any physical commodity.
Futures offered by some online foreign exchange brokers might have underlying assets such as:
- Precious Metals
Since many of the products offered by foreign exchange brokers have recently been introduced, they are largely unregulated and thus have only limited liquidity from the broker where they were initiated.
As a result, the trader of these products will usually be trading against the forex broker’s market maker in each instrument.
Vanilla Currency Options
An increasing number of online forex brokers offer trading in vanilla currency options that provide forex traders with a limited risk way to operate in the forex market. Such currency options include both call options that convey the right to buy the underlying currency or put options that confer the right to sell.
Nevertheless, in the foreign exchange market, an option to buy one currency of a currency pair is also the option to sell the counter-currency of that pair. Thus a trader who thinks EURUSD might rise could buy a EUR call/USD put option.
Some online forex brokers also offer their clients a selection of exotic binary options as an alternative trading vehicle to cash instruments, futures, CFDs or vanilla options.
Traders might pay a premium to buy a binary call option if they think the market will rise above a certain level by expiration. Alternatively, if they think the market might fall, they could buy a binary put option.