What is a Compound Option?

A compound option is essentially like having an option on another option. This is an investment technique that is used in many different situations. Here are the basics of the compound option and how it works.

Compound Option

With this type of option, you are going to have two different strike prices as well as two completely different exercise dates. With a traditional option, you only have one exercise date and one strike price. This means that a compound option is going to be much more complex and is typically reserved for investors that are very advanced in the financial markets.

Forex Trading

The compound option is commonly used when you are involved in the Forex market. This is done because of the extreme volatility of Forex trading. This process helps to eliminate a lot of the risk that traders take on when they are involved in the Forex market. By using this strategy, you will be able to increase the amount of leverage that you have at your disposal. In the Forex market, you are already going to be using fairly high leverage, and this is going to increase the amount of leverage that you have available to you. 

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