Hello everybody,
My name is Chris and I represent https://tradingbud.com. I'd like to share you guys a strategy that is rarely known by traders but many professionals use it.This data is posted on our website on a daily basis, you can find the link at end of the post. Let's get started:
Options are contracts that give the buyer the right to buy or sell an asset at a pre-specified time and price. In return, the seller receives a fee for writing the contract which is termed a premium. A call option is one in which the terms of the contract grant the right to buy the underlying asset, and a put option is one where the right to sell is granted. Since we will only explore the exploitation of options market data for the benefit of the spot trader, there’s no need to examine the details of this trade. Here we invite the trader to regard the currency options market as a closed box, and to concern himself merely with the aspects that we will utilize to predict the movements of spot.
The trading strategies we will discuss are simple and easy to use, and depend on the exploitation of implied volatility for long term trades and expiration data for short term use. To utilize these methods we only need to understand a few simple concepts.
- Strike price: This is the price at which the option will grant a payout, in other words, it will register a profit for the option buyer, depending on the kind of option contract.
- Expiry date: This is the date at which the contract is settled, and payments are made. This is perhaps the most important data for trading spot forex.
- Option size: The payout that the option contract stipulates.
Data on open currency options contracts that are close to expiry is regularly provided by DTCC. You can find this data posted daily in our forum. Open interest on CBOE options is also available from COT reports which the trader can use to form an opinion on trader positioning, and therefore the potential impact of the option on the market.
How to use currency option expiration data to trade the spot market?
One of the easiest and most successful ways of trading the spot currency market is through the use of option expiry data. Options contracts are typically for sums of anywhere between 100 million to 500 million USD, and values beyond the range are not uncommon. Since these are relatively large sums to be concentrated in a few minutes before the expiration, the traders of these options will do all that they can, within reasonable limits, to move the quote to the strike price of the option, provided that the quote is within about 20-30 pips of the strike price at the time of expiry.
Ideal conditions for trading option expiry
The ideal conditions for this method are:
Option expiry is at 10 am EST. (DTCC options expire 10 am EST)
Option size is greater than 500 million USD.
The quote is at the strike price before the news release at 8:30 am EST
The news release is not a major event, such as a Fed decision.
But even without the realization of these conditions sizable profits can be made with this method in a calm and unexcited market. But these overall conditions, along with the significance of the news release, are the main determinants of the market’s mood which will in turn influence our stop-loss and the profit potential.
What happens during an option expiry?
If the price quote is close to the strike price of the option, option traders and other market participants will attempt to steer the quote in direction they desire.
A strong sign that the option traders will defend their position is the early gravitation of the price quote to the strike price. In an example scenario, if there’s a European EUR/USD vanilla put or call option with a strike at 1.1340, and the quote is at 1.1360 at 7:30 am, the quote will be steered to sit on the option strike value at about the news release at 8:30 am. After that, as the price reacts to the news, the quote may move away from the strike price in an unwanted. To successfully profit from this pattern the trader would need to join the option traders as they try to move the quote back to the strike value, and since a lot of people play this game the odds of success are quiet high.
As long as option expiries are proclaimed by news providers, and as long as large expiries tempt option traders to risk relatively small sums to ensure that they receive their payouts, this method will keep paying dividends. An important point that we should keep in mind is the momentum created by option expiries. As option traders buy or sell, their actions will be joined by all sorts of other traders and snowballing effect creates its own power as a mini-bubble is generated. Needless to day, right after the option expiry occurs, the strike price will be just another number on the charts, and will lose all its significance.
You can find option expiration data posted daily here.
If you have any questions feel free to ask, I'll be more than happy to answer you guys.
My name is Chris and I represent https://tradingbud.com. I'd like to share you guys a strategy that is rarely known by traders but many professionals use it.This data is posted on our website on a daily basis, you can find the link at end of the post. Let's get started:
Options are contracts that give the buyer the right to buy or sell an asset at a pre-specified time and price. In return, the seller receives a fee for writing the contract which is termed a premium. A call option is one in which the terms of the contract grant the right to buy the underlying asset, and a put option is one where the right to sell is granted. Since we will only explore the exploitation of options market data for the benefit of the spot trader, there’s no need to examine the details of this trade. Here we invite the trader to regard the currency options market as a closed box, and to concern himself merely with the aspects that we will utilize to predict the movements of spot.
The trading strategies we will discuss are simple and easy to use, and depend on the exploitation of implied volatility for long term trades and expiration data for short term use. To utilize these methods we only need to understand a few simple concepts.
- Strike price: This is the price at which the option will grant a payout, in other words, it will register a profit for the option buyer, depending on the kind of option contract.
- Expiry date: This is the date at which the contract is settled, and payments are made. This is perhaps the most important data for trading spot forex.
- Option size: The payout that the option contract stipulates.
Data on open currency options contracts that are close to expiry is regularly provided by DTCC. You can find this data posted daily in our forum. Open interest on CBOE options is also available from COT reports which the trader can use to form an opinion on trader positioning, and therefore the potential impact of the option on the market.
How to use currency option expiration data to trade the spot market?
One of the easiest and most successful ways of trading the spot currency market is through the use of option expiry data. Options contracts are typically for sums of anywhere between 100 million to 500 million USD, and values beyond the range are not uncommon. Since these are relatively large sums to be concentrated in a few minutes before the expiration, the traders of these options will do all that they can, within reasonable limits, to move the quote to the strike price of the option, provided that the quote is within about 20-30 pips of the strike price at the time of expiry.
Ideal conditions for trading option expiry
The ideal conditions for this method are:
Option expiry is at 10 am EST. (DTCC options expire 10 am EST)
Option size is greater than 500 million USD.
The quote is at the strike price before the news release at 8:30 am EST
The news release is not a major event, such as a Fed decision.
But even without the realization of these conditions sizable profits can be made with this method in a calm and unexcited market. But these overall conditions, along with the significance of the news release, are the main determinants of the market’s mood which will in turn influence our stop-loss and the profit potential.
What happens during an option expiry?
If the price quote is close to the strike price of the option, option traders and other market participants will attempt to steer the quote in direction they desire.
A strong sign that the option traders will defend their position is the early gravitation of the price quote to the strike price. In an example scenario, if there’s a European EUR/USD vanilla put or call option with a strike at 1.1340, and the quote is at 1.1360 at 7:30 am, the quote will be steered to sit on the option strike value at about the news release at 8:30 am. After that, as the price reacts to the news, the quote may move away from the strike price in an unwanted. To successfully profit from this pattern the trader would need to join the option traders as they try to move the quote back to the strike value, and since a lot of people play this game the odds of success are quiet high.
As long as option expiries are proclaimed by news providers, and as long as large expiries tempt option traders to risk relatively small sums to ensure that they receive their payouts, this method will keep paying dividends. An important point that we should keep in mind is the momentum created by option expiries. As option traders buy or sell, their actions will be joined by all sorts of other traders and snowballing effect creates its own power as a mini-bubble is generated. Needless to day, right after the option expiry occurs, the strike price will be just another number on the charts, and will lose all its significance.
You can find option expiration data posted daily here.
If you have any questions feel free to ask, I'll be more than happy to answer you guys.
Trading Option Expirations (Probably one of best strategies)
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