Influence of Options on FX Spot

[bolotrekas]

Hi to all. The news service provided by FX broker has lots of news about fx options, mentioning same-day expiry strike prices, vols and percentages. I know what an option is, but I don't really know how to use these data. What influence do option expiries and strikes have on the movement of spot price? Should I expect price to move towards or away from strike as we aproach expiry time (usually NY cut). Thanks.

[sam111]

I am not really sure what is your question friend.How you want to trade will depend on how u are speculating:Long call/put and/or short call/put.

By combining any of the four basic kinds of option trades (possibly with different exercise prices and maturities) and the two basic kinds of stock trades you get a range of options strategies. Simple strategies usually combine only a few trades, whereas more complicated strategies can combine several..

[bolotrekas]

Thanks for your reply. Maybe I wasn't quite clear. Lets try an example. Imagine the following pops up on my FX broker's news service while I'm whatching the market:

"FX OPTIONS: EUR/CHF Large 1.5270/75 Expiries Today. A cumulatively estimated E1bn of 1.5270 and 1.5275 strikes reportedly roll off at today"s 10am Eastern NY cut"

How am I supposed to read this information? Am I supposed to think EUR/CHF is going to move towards 1.5270/75? or maybe away from it (so as not to hit strike price)?

What about something like the following:

"FX OPTIONS: GBP/USD 6-mth ATMF Vol Firms, Now Pivoting 14.9% . 6-mth ATMF vol is currently indicated at 14.75/15.1, having been 14.5/14.9 at today"s London open."

How do I decipher this? I'm sure this is valuable information; I just don't know how to use it or even read it? Can you help? Thanks.

PS - I believe ATMF means "at-the-money forward"?
PPS - I trade spot, not options. But I believe this options info is there for some reason relevant to spot trading, or am I wrong?

[JonnyFX]

I have done years of stock options trading.
And options actions had very little influence
on the miniscule stock market compared to
the FX arena. So, it is clear that what little
FX options actions go on, it has miniscule to
very little marginal effect on the entire
FX market movement. And another
important thing. Most traders are
oblivious to the whole options arena as you
can see by your responses. So, again no.
Options influence very little in the general
stock market and next to nothing in FX arena.
Do not read options put/call crap when you
are not investing in forex options. Open
your platform and look at the charts instead.
Why? Because options are long-term... shorter
term than that buy and hold mentality in stock
market but options are longer-term than the
majority of traders in the forex market. So
if you are trading like the most of us with FX,
why think or even read long-term related
stuff marketed to options traders? It has
no effect on the market and it does not apply
to the vast majority of short-term fx traders
dominating in the market. It is actually the reverse.
General stock market influences the options market
and the general fx market influences the fx options
trading. Not vice versa. So if you are not investing
in forex options, do not bother with the options news
or price quotes.

[dobro]

Thanks Bolotrekas for posting that question and thanks to Jonny for the expanded answer. I use Oanda and their news service is BIG on option info. They do offer an "Option Box" on the pr one is watching, and perhaps trading, but I've never used it and don't understand it. I had a pretty good week last week without thinking about options so to heck with them. thanks all, d

[bolotrekas]

Hi, thx for your replies.

What I hear is that on the day options are due to expire, holders of said options will trade in the spot market in a such a way so as spot will not hit strike before cut out time (usually 10am NY cut).

I suppose these are those one-strike options (turbo options/warrants) that will lose their total value if spot hits a predefined barrier price even if only once during its life. Of course, those who are short said options will be interested in moving spot price toward strike.

For example, today 21 Oct (so my broker tells me) a hudge volume of 1.3200 EUR/USD options are due to expire, and sure enough, although the pair has been falling, it has also been stalling just around 1.3210 all european morning. Supposedly it will only drop below 1.3200 after cut out time of these options 10am NY.

How true do you think this explanation may be? Thx.

[carlc]

Hi to all. The news service provided by FX broker has lots of news about fx options, mentioning same-day expiry strike prices, vols and percentages. I know what an option is, but I don't really know how to use these data. What influence do option expiries and strikes have on the movement of spot price? Should I expect price to move towards or away from strike as we aproach expiry time (usually NY cut). Thanks.

The option is likely to be exercised, if it is in the money or in other words, the current price is above the strike price. If the current price is below the strike price (out of the money) or exactly the same as the strike price (at the money), the option will be worthless and therefore not exercised.

[anakbaru]

Hi to all. The news service provided by FX broker has lots of news about fx options, mentioning same-day expiry strike prices, vols and percentages. I know what an option is, but I don't really know how to use these data. What influence do option expiries and strikes have on the movement of spot price? Should I expect price to move towards or away from strike as we aproach expiry time (usually NY cut). Thanks.

thanks for the news.. i just lookin for this