Forex option is the contract between a buyer, which is in the business of selling currency, and a seller, the party who has available currency. The purpose of this option is to limit the risk of having to buy the currency at the present time and not being able to sell it at an advantageous price in the future. For the seller, trading the right for the currency at a set amount of time earns him a premium at present. This minimizes the losses of the buyer in case the currency price does not go up in the future. It also gives him the right to sell it if the price is right.
For the seller, selling options will benefit him a premium immediately, rather than hoping to sell the currency at a higher price in the future. Also, if the buyer chooses to let the option expire, he will not be losing the currency he gave the option for.
On the other hand, the buyer gets the option for that currency for a set amount of time for a given premium (price agreed upon). So if the currency's value goes up, he can exercise his option to buy it at the value agreed upon when the forex option was bought and sell it at its current value. But if the value dips then he can just let the contract expire and minimize losses.
Normally banks would be giving forex options and people in the business of currencies are the ones buying options.
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