Today’s forex option expiriesi fopr the 10 am (15.00 GMT) New York cut 8 December 2017
Some very large expiries going off in EURUSD topside between1.1795 & 1.1912. It’s pretty busy across the board though from 1.1500. I don’t exepect to see any action pre-NFP but it could certainly be a factor driving prices after. USDJPY also very lumpy around the big figures. There’s 12.8bn at the bigs figs between 110-115, not to mention the barriers at the top and bottom of that range. Again, we’ll have to see where the NFP puts us. Also note the AUDUSD barrier has been holding on by the skin of its teeth.
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Tidy barriers in USDJPY….just like the DNT old days
They certainly look DNT-ish don’t they?
Do you think that the price for EUR/USD will gravitate to 1.1800 after NFP ?
Hello Adrian , I would say have a look at how wages behave if we get a NFP number close to expectations. If these disappoint we could indeed see EURUSD creep back up and get closer to the option expiry levels. If in turn we get an overall better report, the attraction of these options will get less important.
It’s possible but we’ll have to see how conditions are. While options can have a magnetic effect, it’s not guaranteed. A lot depends on the liquidity in the market. If there’s lots of liquidity, it will take more money to move the spot market around the expiry levels, and thus render it too expensive relative to what’s at stake in the options. Lower liquidity means that it costs less to move the price around so sometimes that’s when we see prominent moves.
It’s very difficult to use the info as a trading strategy as there’s a lot of factors to take into consideration. One of the main things I look for is whether we see any related option moves that take a price out of sync with the intraday trend at the time. For example, let’s say that NFP is very strong and USDJPY jumps 100 pips and the dollar is strong across the board. Near expiry we see a sudden drop to a big option expiry and there’s no news behind it. We also see that the dollar remains strong vs other pairs. We might then assume that the move is indeed options related and that perhaps after the expiry, USDJPY will go back up. If we want to trade that idea we still have to use the same risk definitions we would for any other trade but that might be an opportunity.
If you’d like more information, check out this post https://www.forexflow.live/2017/09/06/options/an-explanation-of-forex-options-and-their-impact-on-currency-markets/
Thank you both, guys.