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FXBoxOption - Basics

Background

FXBoxOption is a new product that is part of the OANDA FXTrade platform. This document describes how to buy and sell BoxOptions, and describes the different options available.

In brief, traders define their own option by drawing a box on the currency chart and indicate whether they believe the exchange rate will eventually move to hit (or miss) the box. The trader chooses a purchase price for their box (e.g., $5 or $100) and from that, the system calculates a payout amount, based on the probability the box will be hit (or missed), as calculated by the FXTrade server. If the trader is successful and the exchange rate hits (or misses) the box, they will receive they payout amount otherwise, their purchase price is forfeit. BoxOption purchases are immediately debited from the trader's account, in real dollars; there is no option to purchase Boxes on margin. Boxes which have not yet been hit/missed are said to be open. Open Boxes can be sold by the user, at a fraction of their final payout amount. This sale amount varies as time goes by.

Buying a BoxOption

Step 1: Click on the [Price Box] button in the FXTrade client.
Step 2: Position the graph to expose the time horizon in which the option is to be defined by using the scroll bar at the bottom of the graph. Then, using the cursor, define the option by drawing a box on the graph: left-click once to mark the first corner of the box, and then left-click again to finalize the box boundary.
Step 3: After defining the BoxOption, a pop-up window appears defining the BoxOption in detail. Fine tune the definition of the BoxOption by adjusting the parameters as necessary. The boundaries of the BoxOption can be modified by adjusting:
  • Start Time,
  • End Time,
  • Maximum Price Level,
  • Minimum Price Level.

As these parameters are modified, the Payout is adjusted automatically. However, note that the final payout amount is determined at the FXTrade server after the purchase order has been submitted.

Then select whether the BoxOption should be a "hit" option or a "miss" option. Hit BoxOptions receive a payout only if the mid-price of the exchange rate crosses the boundary of the Box. Miss BoxOptions receive a payout only if the mid-price of the exchange rate does not cross the boundary of the Box.

Next, adjust the Purchase Price of the option. Again, the Payout amount will automatically change accordingly.

Finally, if the trader is satisfied with all the parameters and potential payout, submit the purchase order by clicking the Submit button. This causes a confirmation window to pop up, and the amount of BoxOption Purchase Price will be immediately deducted from your account balance.

Information regarding the BoxOptions appear in the account's Boxes table and the BoxOptions are depicted in the graph.

Box Color Codes

The following color coding scheme is used for BoxOptions:
  • Blue: a Box Option that has not yet been hit (missed) and is not yet expired.
  • Red: a BoxOption that has expired and was not hit (missed); i.e., the BoxOption was unsuccessful.
  • Green: a BoxOption that was hit (missed), resulting in a payout.
  • Orange: a BoxOption that has been sold back to OANDA.
  • White: a BoxOption that has not yet been purchased.
  • Yellow: BoxOptions that has not yet been purchased and one of its parameters is in violation.

Also note that Hit BoxOptions are shaded within their boundaries, while Miss BoxOptions are shaded externally to their boundaries.

Selling a BoxOption

The Boxes tab also shows a resale value for each BoxOption that has not yet expired. The BoxOption can be sold back to OANDA. Clicking on the appropriate row in the table brings up a window from which the BoxOption can be sold.