Forex Option Trading

In general, options are written either “European style,” which may be exercised only on the expiration date, or “American style,” which may be exercised at any time prior to, and including, the expiration date.
The American option is at least as valuable as the European option, since it provides the buyer with more opportunities, but is analytically more complex. American calls on the higher interest rate currency are likely to be more valuable than the equivalent European option. The bulk of trading in the OTC interbank market consists of European options, while American options are standard on some of the exchanges.

The option is one of the most basic financial instruments. All derivatives, including the various derivative financial products developed in recent years the many forms of forwards, futures, swaps, and options—are based either on forwards or on options; and forwards and options, notwithstanding their differences, are related to each other.
A forward can be created synthetically from a combination of European options: Buying a call option and selling a put option (long a call, short a put) on a currency with strike prices at the forward rate provides the same risk position as buying a forward contract on that currency.
At expiration, the payoff profiles of the forward and the synthetic forward made up of the two options would be the same: The holder would receive the same payoff whether he held the forward or the combination of two options.