MoneyTec Traders Community Forum - View Single Post - How do options affect the price of a currency?

Zigrivers · 06-12-2003, 13:48

I was wondering if some of you more experienced derivitive traders could explain the impact of option expiration on the price of a currency?

From time to time I'll read posts saying that there is a large option expiring at a particular price and because of that the price of the currency is not expected to exceed it. I'll also read that the large option holder(s) will likely be "protecting" their position, which in turn is supposed to cap the price of the currency. I'd like to understand the mechanics better so that I can make my own judgements on the situation.

I understand what options are, but I'm still struggling to understand how they affect the underlying currency when they expire, or are excercised.

Lastly, how much impact do options really have on price based on your experience?

Hopefully, others will find this information useful as well.

Thanks!

06-12-2003, 13:48	#1
Zigrivers level 1 Join Date: Oct 2003 Posts: 18 Downloads: 0 Uploads: 0 Rep Power: 0	How do options affect the price of a currency? I was wondering if some of you more experienced derivitive traders could explain the impact of option expiration on the price of a currency? From time to time I'll read posts saying that there is a large option expiring at a particular price and because of that the price of the currency is not expected to exceed it. I'll also read that the large option holder(s) will likely be "protecting" their position, which in turn is supposed to cap the price of the currency. I'd like to understand the mechanics better so that I can make my own judgements on the situation. I understand what options are, but I'm still struggling to understand how they affect the underlying currency when they expire, or are excercised. Lastly, how much impact do options really have on price based on your experience? Hopefully, others will find this information useful as well. Thanks!