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Jul 10 - 08:55 AM

EUR/USD - COMMENT-There's More To Come - Massive Options Influence EUR/USD

By Richard Pace  —  Jul 10 - 07:15 AM

Hedging FX options contributes a large proportion of intraday EUR/USD spot trading, and given the size of options that are close to expiry, continued hedging maybe having a significant effect on price action.

Dealers will typically neutralise exposure to option strikes by trading an opposing view in the spot market, which can increase as the options expiry date draws closer.
These hedging requirements will grow with the size of the option, and DTCC data shows some massive strikes through July.

There were 60 billion euros of EUR/USD options between 1.1200-1.1400 during the first three weeks of July - a significant amount compared with the mean nL1N2ED07N, which would certainly be playing a part in containing the spot market -- 1.1185-1.1371 so far in July.

DTCC data shows approximately 30 billion euros in this 1.1200-1.1400 range over the next two weeks, with the biggest strikes at 1.1300, 1.1350 and 1.1400 (5-billion each).
However, the size drops significantly into August, and could help to free EUR/USD' shackles thereafter.
Related comments nL1N2EH0G4nL1N2EH0I4

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EURUSD option expiries Click here

Source:
Refinitiv IFR Research/Market Commentary

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