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Jul 03 - 08:55 AM

EUR/USD - COMMENT-FX Option Positioning Leaves EUR/USD Vulnerable

By Richard Pace  —  Jul 03 - 07:35 AM

For the last few weeks, option traders have been paring downside protection to help fund topside options, but that's left a void which could exacerbate any near term squeeze lower.

DTCC data shows option expiries over the next couple of weeks are mainly concentrated between 1.1200 and 1.1400, with little below.

Related delta hedging of impending expiries can help to contain the spot market, as we have seen this week, where 20-billion euro expiries between 1.1200-1.1300 played their part. nL1N2E605V

Over the next two weeks there are 20-billion euro expiries between 1.1200-1.1300 and similar size between 1.1300 and 1.1400 to help slow any further topside progress, but only 6-billion down to 1.1100.
Less expiries mean less delta hedging flow to stem any downside volatility/losses.

With EUR/USD widely expected to head higher over coming months nL1N2EA07P, any setback will present better opportunities to add longs, but if this lack of option coverage does play a part, there may be better levels to buy that dip.

Related comment nL1N2EA08T

For more click on FXBUZ

EURUSD option expiries Click here

Refinitiv IFR Research/Market Commentary


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