If the stock from trading forex options were to close above
$25.00, then the September 25 call would close in-the-money.
At that time, you would be assigned your short September 25
call and that would translate into a short stock position. That
short stock position that you received from trading forex options
and the assignment of your short September 25 call along with
the remaining October 25 long call position is the equivalent
of a synthetic put. At this time, you could close out the position
or keep it.
The position is a bearish one so if you felt the stock from
trading forex options
would be heading down, you could keep
the position on. You could find yourself trading forex options
of a different strike to set up either a bull or bear put spread.
You could buy the October 25 call to create a long straddle.
As you see, there are many different combinations that could
If you were short the September / October 25 call time spread
and your trading forex options expired under $25.00 on expiration
Friday of September, then you would have a remaining position
of a short October 25 call naked. Again, there are many potential
ways of continuing the position. Of course, you could always
buy back the naked call from trading forex options and close
the position if you no longer wanted to maintain a position
in the stock.
If you did, you could buy a call in the same month and create
a vertical spread, sell the corresponding put and create a short
straddle, continue trading forex options 1 to 1 and create a
buy-write or other combination based upon what you felt the
stock would do.
If the stock from trading forex options
closed above $25.00
and you were short the call time spread, then you would be left
with a long stock position from your long September 25 call
and short the October 25 call against the long stock position.
The position you would be left with is a buy-write. Depending
on your outlook for trading forex options, you could keep the
buy-write on, take it off, or use other options to change the
position to what you want it to be.
Trading Forex Options & Rolling Put Spreads
As far as put spreads for trading forex options, lets take
an example and see where we are when the front month option
expires. We will use the September / October 25 put spread for
When long the spread, and trading forex options closes above
$25.00, the September 25 puts, which you are short, will expire
worthless leaving you with a long naked put position. From that
position, you can close it or combine it with other option or
stock to create a different position for trading forex options.
Again, there are many different possibilities.
If you were short the put time spread, and trading forex options
closed above $25.00 then the September 25 put, which you are
long, will expire worthless leaving you with a short naked put
position in the October 25 puts. This position can be closed
out or combined with trading forex options or stock to create
a strategy that will take advantage of the outlook you have
on the stock.
When trading forex options closes below $25.00, the scenario
is different. When long the spread with the stock closing lower
than the strike price, the front month put which you are short
will be assigned to you thus making you long stock in addition
to your long October 25 put. This position is known as a synthetic
As before, there are many ways to combine other options and/or
stock to change the trading forex options position so that it
is in line with want it to be going forward.
If you were short the trading forex options
spread, and trading
forex options closed below $25.00, then you would exercise your
long September 25 put making you short stock and short the October
25 put. That position, which is called a sell-write (the sister
strategy to the buy-write), can be kept as is, closed out, or
changed in different ways by combining it with stock or other
options based upon your expectations of trading forex options