The FX Options Market is far less transparent and far less competitive than the Deliverable FX Market. Thus, without any competition banks have been taking sometimes very large profit margins out of Option structures. Sometimes as much as 2-3%, which on a $10 million dollar Option accounts to $200,000 to $300,000 in profit. Just like deliverable FX, brokers will buy Options at a specific rate and sell to you at another rate, their profit being the difference. The reason brokers can offer you better pricing is a result of the volumes they transact over the course of the year, economies of scale allow them to improve your price compared to the bank and make their profit in the difference. For Zero Premium Options, brokers will sell their structures to banks, the sale amount being their profit.
