(Repeat with addition of Thursday's EUR/USD expiries)

June 18 (Reuters) - Foreign exchange option expiries for the New York cut at 10.00 a.m New York (1500 GMT) can, under certain conditions have an impact on currency spot prices.

For Thursday's EUR/USD expiries there is a massive 1.1500 strike worth over EUR 14 billion. This deal is likely to impact the spot price.

Gamma hedging is a major driver when traders who are short of options often hedge their exposure in spot. As spot moves closer to key strikes near the expiry time, hedging flows can increase and become one-sided (buying if market is below a big strike, selling if above), which can influence spot.

Market conditions that can heavily influence the impact of option expiries include the following. The notional size of the expiry if large relative to typical market liquidity in that pair and the time of day. Strikes that are near the current spot (at or very near-the-money into the cut), especially if there are several clustered strikes. If dealer positioning is skewed (the street is generally short gamma), so many players need to hedge in the same direction and if liquidity is thinner (e.g., around data, holidays, or in less-liquid currency crosses), so hedging flows have a greater impact.

Spot traders will look for patterns that can appear ahead of option expiries.

Magnet effect: If there's a large expiry, at or very near spot, the price sometimes gravitates toward that strike into the cut as hedgers adjust.

Volatility spike / mean reversion: Short-gamma hedgers may buy high and sell low as spot moves, which can add noise and short-term volatility. Long-gamma players can have the opposite, dampening effect.

Fade after the cut: Once the options expire and hedging flows stop, the market can "relax", and any artificial pressure around a strike may fade.

Option expiries, if strikes are large can impact spot but not always, and usually only when certain conditions are met.

EUR/USD option expiries for Thursday, June 18
EUR/USD Option expiries for June 18


(Peter Stoneham is a Reuters market analyst. The views expressed are his own)