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Forex Call Option - A forex call option gives the buyer the right, but not the obligation, to purchase a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date). The amount the option buyer pays to the option seller for the option contract is called the option "premium."

Forex Put Option - A forex put  option gives buyer the right, but not the obligation, to sell a specific foreign exchange spot contract (the underlying) at a specific price (the strike price) on or before a specific date (the expiration date).

Note: "Calls" and "Puts" are separate options contracts and are NOT the opposite side of the same transaction. For every “put” buyer there is a “put” seller, and for every “call” buyer there is a “call” seller. The options buyer pays a premium to the option seller in every option transaction.

Plain Vanilla Forex Options - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange. In simple terms, it would be defined as the buying or selling of a standard forex call option contract or a forex put option contract.

Exotic Forex Options – In Plain vanilla forex options there has definite expiration structure, payout structure and payout amount. Exotic forex option may have modified in one or all of the above features of a plain vanilla forex option. It is important to note that exotic options are generally not very liquid, if at all.

Intrinsic value - The intrinsic value of an FX option is defined as the difference between the strike price and the underlying FX spot contract rate. The intrinsic value represents the actual value of the FX option if exercised. Please note that the intrinsic value must be zero (0) or above. An FX option with no intrinsic value is considered as "out-of-the-money," an FX option having intrinsic value is considered "in-the-money," and an FX option with a strike price very close to underlying FX spot rate is considered "at-the-money."

Extrinsic value - The extrinsic value of Forex option is defined as the value of a Forex option beyond the intrinsic value. A number of factors contribute to the calculation of the extrinsic value including volatility of two spot currencies, time left pending expiration, riskless interest rate of both currencies, spot price of both currencies and the strike price.  

Note: Extrinsic value of Forex options gears up as its expiration nears. Forex option with 60 days left to expiration will be worth more than that has only 30 days left to expiration the same Forex option. Because there is more time for the underlying Forex spot price to possibly move in a favorable direction. Forex options sellers demand higher premium for the extra amount of time.