Foreign exchange (FX) options give traders the ability to hedge against unforeseen currency movements or to speculate on potential movements. These options grant the right, but not the obligation, to buy or sell a currency at a specified price within a specific timeframe. The price paid for the option is known as the premium, and it is the most significant cost associated with FX options.
Option expiries refer to the date and time at which an option contract expires, and the holder of the option must decide whether to exercise the option or let it expire worthless. Option expiries can have significant implications for currency prices as traders adjust their positions in anticipation of price movements.
On March 17, 2022, the FX option expiries for the New York cut at 10:00 Eastern Time, via the Depository Trust & Clearing Corporation (DTCC), are as follows:
EUR/USD:
– 1.0500 – EUR 1.2 billion
– 1.0660 – EUR 1.7 billion
– 1.0710 – EUR 5.1 billion
– 1.0775 – EUR 1.4 billion
USD/JPY:
– 131.00 – USD 937 million
– 132.00 – USD 1.7 billion
– 133.00 – USD 2.0 billion
– 133.60 – USD 698 million
– 134.00 – USD 1.2 billion
– 135.00 – USD 1.5 billion
AUD/USD:
– 0.6580 – AUD 831 million
– 0.6650 – AUD 1.1 billion
– 0.6700 – AUD 611 million
These figures represent the notional value of options that will expire on March 17, 2022, at the specified levels. The notional amount is the total value of the option contract. It is calculated as the option price multiplied by the size of the underlying currency amount that the contract controls.
Several factors can impact currency prices as option expiries approach. Traders may adjust their positions to lock in profits or limit losses. Additionally, currency prices may be influenced by the supply and demand of the underlying currency created by the option contracts. As option expiries approach, market activity often increases as traders adjust their positions in anticipation of price movements.
The EUR/USD currency pair is one of the most actively traded pairs in the FX market. The options expiring at 1.0660 and 1.0775 represent a significant amount of notional value, indicating that traders may have established positions at these levels. These options may act as support or resistance levels for the currency pair as investors react to the expiries.
USD/JPY is another major currency pair, and the options expiring at 132.00, 133.00, and 134.00 represent a substantial amount of notional value. These levels may also act as support or resistance, potentially influencing the direction of the currency’s price.
The AUD/USD currency pair is often used as a proxy for the Chinese yuan due to their close economic ties. The options expiring at 0.6650 are of significant notional value and may impact the currency pair’s price in the near-term.
Option expiries can significantly impact currency prices, and traders should be aware of these events when establishing positions. While there is no guaranteed outcome for any option expiry, traders can use the information provided to create informed strategies and potentially capitalize on price movements.
