How To Use The Financial Source Option Expiry Report
This is a quick guide on how to incorporate the Financial Source Option Expiry Report into your analysis.
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We have questions from Shariar as well as Tushar about the new Financial Source Options Expiry Report we have in the ‘Must Read’ section of the terminal.
As always thanks for the questions guys, so as you know we have always added the regular daily option expiry levels into the terminal on a daily basis, but until recently we’ve only ever had the total option expiry levels for each day, but we never knew whether the orders were puts or calls.
Now for simplicity, an option contract gives the owner the option to buy or sell something at a specific price at a specific date.
For example, when a trader buys a call option on the EURUSD at 1.19 they are essential buying the option or the right to buy the EURUSD at 1.19 (but they are not obliged to do so), and they pay a premium to hold that option.
When a trader buys a put option on the EURUSD at 1.19 they are buying the option to sell the EURUSD at 1.19 (but they are not obliged to do so), and the traders that buys the put option again pays a premium to hold that option.
It is important to remember that the buyer of a call or put option is not obliged to buy or sell at the price, which means even though these levels can be influential it does not mean that call or put buyers will lose money if the price is out of the money, they still need to pay their premium, now there is also call sell option contracts and put sell option contracts but they are a bit more complicated so lets just stick to call and put buy options for now.
So let’s quickly just show everybody where to find the pdf, just go to the Must Read tab in the terminal and then you find the item called MAJOR FX OPTION EXPIRIES, and if you open up the feed item there should be a link that you can follow inside the post.
Right, now that you have it open, you can see exactly where there are big option contracts sitting at key levels on the charts, if we take a look at EURUSD for example, we have a few levels here, but we know that price is only close to the 1.19 right now so that is where all the focus will be.
Now, we can also see that we have almost a billion in options rolling off at the 1.19, and more so, 99% of that total size is all call options, so there is a lot of incentive for the holders of call buy option contracts to see the price trade above, and if it was put options there would be a lot of incentive for put option holders to see the price trade below that level.
So, using this in a very simple way is just to think of these big expiry levels as magnets that the price might gravitate towards, and key areas where the market might bounce from as well.
For example, last week when we had the RBNZ meeting we had quite a sizeable option expiry that was only call options sitting at 0.6525, so that was a key area where we could have expected some reaction from the market, and if we go to the NZDUSD we can see with the RBNZ spike to the downside that was the exact level where price bounced from, literally to the pip.
So, you can basically incorporate these levels into your analysis as additional areas of confluence where the price might react from or gravitate towards. Generally speaking anything above or close to 1 billion is a bid deal, but on a light week where options contracts are thin or if it’s something that has lesser liquidity even something smaller like 600 million can be significant.
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If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
We have questions from Shariar as well as Tushar about the new Financial Source Options Expiry Report we have in the ‘Must Read’ section of the terminal.
As always thanks for the questions guys, so as you know we have always added the regular daily option expiry levels into the terminal on a daily basis, but until recently we’ve only ever had the total option expiry levels for each day, but we never knew whether the orders were puts or calls.
Now for simplicity, an option contract gives the owner the option to buy or sell something at a specific price at a specific date.
For example, when a trader buys a call option on the EURUSD at 1.19 they are essential buying the option or the right to buy the EURUSD at 1.19 (but they are not obliged to do so), and they pay a premium to hold that option.
When a trader buys a put option on the EURUSD at 1.19 they are buying the option to sell the EURUSD at 1.19 (but they are not obliged to do so), and the traders that buys the put option again pays a premium to hold that option.
It is important to remember that the buyer of a call or put option is not obliged to buy or sell at the price, which means even though these levels can be influential it does not mean that call or put buyers will lose money if the price is out of the money, they still need to pay their premium, now there is also call sell option contracts and put sell option contracts but they are a bit more complicated so lets just stick to call and put buy options for now.
So let’s quickly just show everybody where to find the pdf, just go to the Must Read tab in the terminal and then you find the item called MAJOR FX OPTION EXPIRIES, and if you open up the feed item there should be a link that you can follow inside the post.
Right, now that you have it open, you can see exactly where there are big option contracts sitting at key levels on the charts, if we take a look at EURUSD for example, we have a few levels here, but we know that price is only close to the 1.19 right now so that is where all the focus will be.
Now, we can also see that we have almost a billion in options rolling off at the 1.19, and more so, 99% of that total size is all call options, so there is a lot of incentive for the holders of call buy option contracts to see the price trade above, and if it was put options there would be a lot of incentive for put option holders to see the price trade below that level.
So, using this in a very simple way is just to think of these big expiry levels as magnets that the price might gravitate towards, and key areas where the market might bounce from as well.
For example, last week when we had the RBNZ meeting we had quite a sizeable option expiry that was only call options sitting at 0.6525, so that was a key area where we could have expected some reaction from the market, and if we go to the NZDUSD we can see with the RBNZ spike to the downside that was the exact level where price bounced from, literally to the pip.
So, you can basically incorporate these levels into your analysis as additional areas of confluence where the price might react from or gravitate towards. Generally speaking anything above or close to 1 billion is a bid deal, but on a light week where options contracts are thin or if it’s something that has lesser liquidity even something smaller like 600 million can be significant.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
