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

mishak · 06-12-2003, 19:28

Hi Zigrivers

Well, we are speaking here about OTC options sold by big players. Usually big banks offer various kind of barrier options to their big commercial clients (and maybe bank counterparts).
This make hedging cheaper for clients (or big bets on interbank market).
Big payout occurs when some specific price level is broken. So, players may wish to protect it (say 0.7350 in AUD) by selling (AUD) on spot.
This may work well in ranging market, but not very good now with long major downtrend in USD.
OTC options are usually have round figure strikes and expire in London (15:00GMT). However may be specifics in strikes and cut times - Tokyo cut (6:00 GMT) or NY cut (12:00 NY time).

Such kind of options may block the price movement in thin or ranging markets or when trend is exhausting. They may delay the price action for couple days in trending markets.

You may consider them as some resistance levels. When they expire they just disappear. When taken you may expect follow thru up to 50 pips.

06-12-2003, 19:28	#2
mishak old hand Join Date: Oct 2003 Posts: 1,066 Downloads: 0 Uploads: 0 Rep Power: 0	OTC options Hi Zigrivers Well, we are speaking here about OTC options sold by big players. Usually big banks offer various kind of barrier options to their big commercial clients (and maybe bank counterparts). This make hedging cheaper for clients (or big bets on interbank market). Big payout occurs when some specific price level is broken. So, players may wish to protect it (say 0.7350 in AUD) by selling (AUD) on spot. This may work well in ranging market, but not very good now with long major downtrend in USD. OTC options are usually have round figure strikes and expire in London (15:00GMT). However may be specifics in strikes and cut times - Tokyo cut (6:00 GMT) or NY cut (12:00 NY time). Such kind of options may block the price movement in thin or ranging markets or when trend is exhausting. They may delay the price action for couple days in trending markets. You may consider them as some resistance levels. When they expire they just disappear. When taken you may expect follow thru up to 50 pips. __________________ Take Care and Have Fun Last edited by mishak : 06-12-2003 at 19:32.