Options Expiries? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Where to view option expiries? 0 replies

Any Options, Bull Options & Option Bit 39 replies

Expiries 1 reply

Options: Expiries of note for NY Cut (1400GTM) 0 replies

Option Expiries - How do they affect the FX market 7 replies

Attachments: Options Expiries?
Exit Attachments

Options Expiries?

  • #1
  • First Post: Dec 6, 2012 12:30pm Dec 6, 2012 12:30pm
Hi,

Can someone interpret what these options expires mean are they expiring worthless? Does it mean it could be levels of high liquidity?

http://www.fxstreet.com/news/forex-n...7-8dad66e260de
Find your Favourite Pattern
  • #2
  • Dec 6, 2012 2:41pm Dec 6, 2012 2:41pm
http://m.youtube.com/index?&desktop_...?v=mkDb82EOHJU
Time hides Nothing
  • #3
  • Dec 6, 2012 3:35pm Dec 6, 2012 3:35pm
Quoting Pipanator
Hi,
Quoting Pipanator

Can someone interpret what these options expires mean are they expiring worthless? Does it mean it could be levels of high liquidity?

http://www.fxstreet.com/news/forex-n...7-8dad66e260de


they're strike prices, depends on whether call/put, settled against the underlying spot price. also whether you're treating them as outrights or hedge.
  • #4
  • Dec 6, 2012 4:29pm Dec 6, 2012 4:29pm
oh well there ya go lol
Time hides Nothing
  • #5
  • Dec 6, 2012 4:42pm Dec 6, 2012 4:42pm
there are other expiries as well and largish ones arer up at 1.3050 and 1.3100 but there not huge as far as i can gather.
One observation noted over the years is the powerful magnetic attraction of market prices to large expiries of so-called vanilla (plain ordinary puts and calls) options.
All things being equal (are they ever?) prices tend to gravitate toward the strike price at the time of expiry.
Why?
Because each side of the trade has to actively hedge their exposure.
Let’s use the example of a $500 mln JPY put/USD call struck at 100.00.
One side has an exposure of $500 mln dollars when the market is at or above 100.00 and the other side has no exposure. At 99.99, the other side of the trade has a $500 mln exposure and the other side has zero. All the jockeying back and forth tends to draw prices close to the strike as each side tries to position themselves for the moment when the option is exercised or expires out of the money.
This action is most noticeable in the run-up to 10 am New York time when the vast

taken from fxlive
  • #6
  • Dec 6, 2012 7:46pm Dec 6, 2012 7:46pm
Thanks MH Trader. So, we can use them as either resistance levels or price projections as you say price gravitates to and from them they seemed to work today on the euro for price projections!
Find your Favourite Pattern
  • #7
  • Dec 6, 2012 8:46pm Dec 6, 2012 8:46pm
Sorry guys... as someone who has traded FX options before for Banks, let me say that the only option expiries that "matter" (if at all) are non-plain-vanilla options such as barriers (knock-ins, knock-outs etc. that sort of thing).

Plain vanilla options (such as simple calls and puts with single strikes) are easily and continually hedged in the spot and options markets. As the hedging takes place over time until expiry (for these plain vanilla options), PRICE NEED NOT GRAVITATE TOWARD STRIKE PRICE ON EXPIRY. i.e. NOTHING spectacular usually happens on the expiry of plain vanilla options as the experienced option seller is usually already FULLY HEDGED on expiry. Even taking into account PIN RISK (please Google if you don't know), the "volatility" is no big deal (to me anyway), as far as plain vanillas are concerned.

In other words, it doesn't matter to an option seller if the plain vanilla option he sold becomes ITM (In The Money) because his continual hedging in the spot and options market ensures his loss is limited. In fact, the option seller might even come out ahead (on THAT ONE OPTION POSITION) if he positioned his portfolio optimally along the way. And the option seller doesn't even CARE if that one option he sold is bleeding because he will have OTHER options in his portfolio to take up the slack.

The only trader who WILL blow up on the expiry of plain vanilla option is the option seller under the following conditions:
1. he only sold ONE option
2. spot moves against him, rendering the option ITM (bad for the option seller, good for the option buyer)
3. he DID NOT hedge his position at all until expiry.
4. (in other words, the option seller is a pothead and deserves to be fired).

When you read in the news that spot moved because of this or that option expiry, it's usually the case they're talking about non-plain-vanilla options (aka exotic options).

For an appreciation of the complexities of hedging such instruments, Taleb's "Dynamic Hedging" book makes a good survey.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #8
  • Dec 6, 2012 8:54pm Dec 6, 2012 8:54pm
Quoting Pipanator
Thanks MH Trader. So, we can use them as either resistance levels or price projections as you say price gravitates to and from them they seemed to work today on the euro for price projections!
As for whether you can use FXStreet's "levels" as S/R or price projections depends on whether they're talking about barrier levels or plain vanillas. If it's the latter, then that information is practically useless.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #9
  • Dec 6, 2012 8:59pm Dec 6, 2012 8:59pm
Hi Guys, yeah I have to agree with skenobi's post. Seasoned traders are always hedging their bets (funny this got taken away from us here in the U.S. in the spot market, but thats another story). You can follow the daily activity at the CME website. I've actually taken a couple of screenshots around end of day for the Dec 12 EURUSD option chain. Take a look and see how the daily activity changes in total puts and calls. Traders are clearly hedging positions as the price changes.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 11-29-12.jpg Size: 282 KB
Click to Enlarge Name: 11-30-12.jpg Size: 289 KB
Click to Enlarge Name: 12-3-12.jpg Size: 287 KB
  • #10
  • Dec 6, 2012 9:06pm Dec 6, 2012 9:06pm
Quoting TheDirtySerb
Hi Guys, yeah I have to agree with skenobi's post. Seasoned traders are always hedging their bets (funny this got taken away from us here in the U.S. in the spot market, but thats another story). You can follow the daily activity at the CME website. I've actually taken a couple of screenshots around end of day for the Dec 12 EURUSD option chain. Take a look and see how the daily activity changes in total puts and calls. Traders are clearly hedging positions as the price changes.
Like some species of shark, options traders have to be continually "moving" (i.e. rebalancing their portfolio) or they WILL die. I suppose the same can be said for traders in other asset classes as well.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #11
  • Dec 6, 2012 11:19pm Dec 6, 2012 11:19pm
Quoting skenobi
Sorry guys... as someone who has traded FX options before for Banks, let me say that the only option expiries that "matter" (if at all) are non-plain-vanilla options such as barriers (knock-ins, knock-outs etc. that sort of thing).

Plain vanilla options (such as simple calls and puts with single strikes) are easily and continually hedged in the spot and options markets. As the hedging takes place over time until expiry (for these plain vanilla options), PRICE NEED NOT GRAVITATE TOWARD STRIKE PRICE ON EXPIRY. i.e. NOTHING spectacular usually happens...
Thanks skenobi, my quote was from fxlive. So only exotic options would drive moment in spot? Is there really a "battle" between the holder and seller to move price to their advantage? Or only if price is near "ITM", because it seem expensive and risky.
  • #12
  • Dec 9, 2012 4:14am Dec 9, 2012 4:14am
Quoting M-H Trader
Thanks skenobi, my quote was from fxlive. So only exotic options would drive moment in spot?
Not the option contracts themselves per se. But the ACTIONS of the transactors AFTER the options are bought/sold up to the point the options are exercised or expired. And that "moment" you speak of is just one tiny moment in thousands of moments.

It would seem y'all don't realise that options traders make decisions based on open "greek" risks of their ENTIRE portfolios, NOT on any individual option contract. So they will have order levels all over the charts and not necessarily near the so-called "all-important" strike price.

Hence I'm perplexed at retail traders who obsess needlessly about option strike levels when even the pros don't always give a sh!t about them. All the pros care about are stuff like:

Whether their portfolio is long or short gamma/vega
Whether they're trading delta too much or too little.
Whether they're trading with or against the market skew. (which I think is something even retail traders should pay more attention to.)
Whether their hedges will last long enough for them to take a breather or at least keep them within company risk limits for some time.
Whether they'll still have a job when they wake up in the morning (true story!)

Quoting M-H Trader
Is there really a "battle" between the holder and seller to move price to their advantage?
The only battle is between the buyer/seller against The Rest of the World. The markets do not belong to the options traders.

Quoting M-H Trader
Or only if price is near "ITM", because it seem expensive and risky.
I think you meant to say "if price is near the point where the option contract turns from ITM to OTM (Out of the Money) or vice versa as the option approaches expiry". That situation is known as "pin risk".

Insofar as plain vanilla options are concerned, you can refer back to my prior statement where I began with "Nothing spectacular..". If we're talking about exotic options, the complexities of hedging these is beyond the scope of the retail traders here. They may have SOME effect on the market but because even barriers are traded as part of a portfolio of other options, I don't think they're useful in any way.

Let's put it this way: If you don't know the option traders' OTHER order levels (which are usually hedge-related, not option-related), then knowing ONLY the barrier levels or even plain-vanilla option strikes is like solving ONLY the outer borders of a jigsaw puzzle.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #13
  • Dec 12, 2012 4:09pm Dec 12, 2012 4:09pm
So, basically what your saying in essence is that options expires have no relevance to someone trading the spot or any other markets?
Find your Favourite Pattern
  • #14
  • Dec 12, 2012 7:27pm Dec 12, 2012 7:27pm
Quoting Pipanator
So, basically what your saying in essence is that options expires have no relevance to someone trading the spot or any other markets?
The short answer: Yes, options expiries HAVE no relevance to the spot trader.

The long answer:
1. plain vanilla options expiries do not matter as an experienced option seller would have been more-or-less already fully hedged by then and the option buyer SHOULD have already made money from delta hedging his option assuming spot market was volatile enough. NEITHER of which also matters since the option is part of a LARGER PORTFOLIO and the traders are trading based on their portfolios and NOT individual option contracts.

2. re:non-plain-vanilla options (aka exotic options), SOMETIMES barrier levels matter if a player's position is large enough to attract boring vultures (this is my observation), but in the larger scheme of things, there are MANY other orders floating around in the market that it doesn't really matter. The option player probably has more to fear from the wider market sentiment than from the vultures.

3. Knowing ONLY the barrier levels and/or plain vanilla strikes is pointless to the spot trader if he doesn't also know the options traders' spot hedging orders, which the casual spot trader will NEVER know. So a broker or a portal provides you with a handful of order levels for you to target? So what? The bigger market makers (the Banks) have hundreds of orders in their books at different price levels, which you will never know.

... like only building the outer edges of a jigsaw puzzle and missing all the inner pieces.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #15
  • Dec 12, 2012 7:37pm Dec 12, 2012 7:37pm
Quoting Pipanator
So, basically what your saying in essence is that options expires have no relevance to someone trading the spot or any other markets?
It has none at all. That is for sure.
  • #16
  • Last Post: Dec 20, 2012 5:51pm Dec 20, 2012 5:51pm
Quoting Pipanator
So, basically what your saying in essence is that options expires have no relevance to someone trading the spot or any other markets?
Well yeah mostly you dont have to worry about them. Cause they can only have an effect when there are no other dominant theme driving the market + market is in 20-30 zone closer to them and and size of the expires.

Though the market was very far from the expiry (3300) first condition applied very clearly today as no one else had an interest in the market and Size was decent.

So that happens (the red vert line is expiry time (10AM NY CUT).

(i know lousy execution)
.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: espres.png Size: 49 KB
Click to Enlarge Name: eu.jpg Size: 70 KB
0 traders viewing now