We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is a Seagull Option?

Malcolm Tatum
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A seagull option is a fanciful name for a type of investment strategy that is sometimes used in currency trading circles. The process involves using a combination of purchases and sales on the currency options involved in an attempt to keep the risk level of the investment within reason. In addition to minimizing risk, the use of a seagull option is relatively inexpensive, especially when considering the amount of protection that can result from the arrangement.

The basic structure of the seagull option involves the creation of a hedge that helps to protect the investor from incurring a loss on the currency trade. This is managed by purchasing a call option while also selling a put option, or creating a combination that involves a call option for sale and a the purchase of a put option. This arrangement allows the investor to exercise whichever option is in line with what takes place on the foreign exchange or Forex market, and still be able to generate some return from the trade.

In order for the seagull option to function properly, it is essential that the two options involved are equal in terms of amount, and that the options are priced in a manner that will effectively create a zero coupon. With this arrangement, the investor is effectively insulated from situations in which there is a high level of volatility, and there is a strong indication that significant changes in the rate of exchange will soon occur, but without any solid indication of what direction that rate will move. As the movement becomes apparent, the investor can simply exercise the option that will provide the most benefit while allowing the other option to lapse.

As with any type of investment strategy, the seagull option calls for choosing the right combination of puts and calls, and making sure the expiration dates for the options are in line with the expectations for those shifts in the rates of exchange. Taking the time to project the outcome based on more than one potential movement of the rate of exchange is a good way to test the likely results of the combination under consideration. While this particular option strategy will help to reduce the level of risk assumed by the investor, the arrangement does not completely remove all volatility. There is still the chance that the return will be more modest than anticipated, especially if the movement on the exchange rate is not as significant as anticipated.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.