Impact of option expiry on a currency | Forex Factory

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Impact of option expiry on a currency

  • #1
  • First Post: Apr 22, 2015 4:54am Apr 22, 2015 4:54am
I'm an avid follower of the EURUSD thread, because apart from the trolls and garbage, some quality info is also to be found in that thread. Something I've noticed, is that sometimes people refer to "option expiry". This should have some kind of impact I imagine, however I don't know how.

Today I read this in my tradeaccount:

Quote

  1. EUR/USD nears 1.0800 option expiries for NY cut (EUR 3bln)
  2. Delta hedging could help contain nearby/limit any potential gains above
  3. DTCC shows a further EUR 677mln expiry at 1.0800 tomorrow

Source: Thomson Reuters


Is there anybody who could explain, as simply as possible, the effect of an option expiry for EURUSD at 1.08, given that the price currently is FOR EXAMPLE 1.075 (I know it's higher now)?
  • #2
  • Apr 22, 2015 8:08am Apr 22, 2015 8:08am
Where did you got the info... Sometimes Info's are useless or simple rumors to absorb the traders... Nonetheless their usefulness depends upon source...
  • #3
  • Apr 22, 2015 9:12am Apr 22, 2015 9:12am
Quoting ExForX
Is there anybody who could explain, as simply as possible, the effect of an option expiry for EURUSD at 1.08, given that the price currently is FOR EXAMPLE 1.075 (I know it's higher now)?
"As simply as possible"... these are complicated concepts. Here's as bare bones as I can make it.

In the spot Fx market, option contracts are worth $100 million to $750 million and sometimes more. As you can imagine, there is a lot of vested interest in at the strike.

In your example, say you are trading a vanilla put/call option with a strike at 1.08.
As an example, a large player has puts on EURUSD expiring 1.08. Vendors of the put options will try to keep the price above the strike.

To put it another way, if the price is within reach at expiry, one side will try push price through the strike (trigger the option), and the other will try and protect price from moving there.

Order flow much?
Follow me on twitter @FxLester
  • #4
  • Apr 22, 2015 10:37am Apr 22, 2015 10:37am
Quoting FxLester
{quote} "As simply as possible"... these are complicated concepts. Here's as bare bones as I can make it. In the spot Fx market, option contracts are worth $100 million to $750 million and sometimes more. As you can imagine, there is a lot of vested interest in at the strike. In your example, say you are trading a vanilla put/call option with a strike at 1.08. As an example, a large player has puts on EURUSD expiring 1.08. Vendors of the put options will try to keep the price above the strike. To put it another way, if the price is within reach...
Ok so if I get it correctly, whenever there is an option expiry (larger = more influence), price will tend to gravitate towards that price, especially if it's already lingering within an attainable distance, because a lot of money is envolved the "big boys" will try to reach their targets?
  • #5
  • Apr 22, 2015 10:39am Apr 22, 2015 10:39am
Quoting Eagleprice
Where did you got the info... Sometimes Info's are useless or simple rumors to absorb the traders... Nonetheless their usefulness depends upon source...
I get this news from my trading platform. My broker supplies this, I don't attach much value to most news, but sometimes interesting facts come to light. (e.g. economic numbers, mostly faster than on the FF calendar!).
  • #6
  • Apr 22, 2015 10:32pm Apr 22, 2015 10:32pm
Please visit this thread, with special attention to my own responses for a more informed exposition of how FX options come into play in retail forex.

You may also want to check out this other thread.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #7
  • Apr 23, 2015 3:27am Apr 23, 2015 3:27am
Thanks guys, this is interesting.
  • #8
  • Apr 25, 2015 5:53am Apr 25, 2015 5:53am
Quoting ExForX
Thanks guys, this is interesting.
ExForX... thought you might be interested in this image I made. Illustrates the above example I gave with a real life option expiry.

Attached Image (click to enlarge)
Click to Enlarge Name: AUDNZD_d.png Size: 41 KB


Like I said.. order flow much

This info is powerful... what you do with it is up to you
Follow me on twitter @FxLester
  • #9
  • Jan 15, 2025 5:32am Jan 15, 2025 5:32am
Quoting ExForX
{quote} Ok so if I get it correctly, whenever there is an option expiry (larger = more influence), price will tend to gravitate towards that price, especially if it's already lingering within an attainable distance, because a lot of money is envolved the "big boys" will try to reach their targets?
Precisely like that.
Always follow your own shit
  • #10
  • Last Post: Jan 24, 2025 5:36am Jan 24, 2025 5:36am
Quoting skenobi
Please visit this thread, with special attention to my own responses for a more informed exposition of how FX options come into play in retail forex. You may also want to check out this other thread.
Precisely like this.
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