Currency futures options?

[Chartsy]

wondering which brokers you use for currency futures options? correct me if i'm wrong but does the CME/Globex handle the counterparty risk with these options, whereas spot FX options is otc and unregulated? thanks

 

[Rhody Trader]

You can generally trade futures options with the same brokers that handle futures. And yes, the counterparty on the options is handled via the clearing mechanism the same as with futures, while spot is a direct counterpary.

 

[Chartsy]

You can generally trade futures options with the same brokers that handle futures. And yes, the counterparty on the options is handled via the clearing mechanism the same as with futures, while spot is a direct counterpary.

seems spot forex is the wild west. Been reading up on counterparty stuff and think futures is the way to go for fx, cost of carry tends to be smaller and pay out of carry tends to be greater than spot
thanks

 

[Martinghoul]

seems spot forex is the wild west. Been reading up on counterparty stuff and think futures is the way to go for fx, cost of carry tends to be smaller and pay out of carry tends to be greater than spot
thanks

This is incorrect, in a variety of ways...

 

[Chartsy]

This is incorrect, in a variety of ways...

explain, i want to learn more about the advantages of spot vs derivatives

 

[Martinghoul]

Well, firstly, counterparty risk isn't quite what you think it might be, as OTC FX options are collateralized. As to the cost of carry, it has to be the same, otherwise there's an arb. The payout of carry also can't be different for the same reason. Furthermore, in terms of capital usage, because exchange margins are a lot more punitive than OTC, your return on capital is going to be worse for exch-traded stuff. That's the price to pay for the "safety" aspect the exchanges offer.