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In this video, the basics of currency options are explained. A currency option is a contract between a buyer and a seller, giving the buyer the right to buy or sell a fixed amount of the underlying currency at a set price by the expiration date. The buyer is not obligated to do so unless it is profitable. Key elements of a currency option include the premium (price paid by the buyer to the seller), predetermined price (strike price), spot rate (market price of the currency), and expiration date. If the option is not exercised by the expiration date, the buyer loses the premium.