what are options in forex?

First of all I want to say this: when you are trading anything through a forex broker, you are not trading the actual instrument itself, instead you are trading a "derivative" of that instrument.

So when you talk of trading options through your forex broker, you are not trading the real option contracts instead you are trading a derivative of the options contract meaning you do not own the actual options.

Now to the definition of options, an option is a contract (between the option seller & option buyer) that gives the buyer the right but not the obligation to buy or sell a given quantity of an instrument, at a given "strike price" on or before a given time.

The option buyer pays a "premium" to the options seller in order to purchase the contract but the buyer is under no obligation to follow through with the agreement contained in the options contract.

If the options buyer chooses to walk away from the contract there is no problem but he will have to forgo the premium he paid to the options seller.

To add to what @martini said, traditionally options are used when investors are afraid for their investment, hence it is used as a hedge.

if you bought Apple stocks today and you hear that in one month the price might go down, you can protect your investment by buying "put options" that give you the right to sell off your Apple stock at the same price you bought them for .

If at the end of the month the price of Apple doesn't fall, you don't necessarily have to abide by the contract terms, so you can refuse to sell the Apple stock but you will lose the money (premium) which you paid to buy the options contract in the first place.

The definition of an option is split into two and it depends on whether you are the one selling the option, or if you are the one buying the option.

When you sell an option to somebody, it means the person has the right to buy or sell the quantitiy of an instrument speficied in the contract, to you. The person can also chose not to act so there is no obligation on their part to follow through with the contract. if person you sold the option contract to refuses to exercise it, he will lose the money he paid to you ti buy it. So you will keep his money.

However, when you buy an option from somebody like i said, you have the right but not the obligation to sell/buy what is in the contract to/from that person during the timeframe before the contract expires (during the lifespan of the option contract). This means if you choose to exercise the contract, the person who sold it to you must abide my the terms.

if you bought an option contract that says sell 10,000 AAPL shares to the option seller in 30 days, the option seller must buy those shares from you whether he likes it or not.

Options are just a way for investors to manage the many risks they face when doing business.

Forex options are OTC (over-the-counter) derivatives that give the holder the right, not obligation to exchange one currency for another at a pre-defined strike on or before expiry.