So what can $3,5bn in option strikes do to the spot price in a relatively calm currency? Sweet FA by my analysis.
Yesterday I decided to test the magnetism of the large USD/CAD option that expired today at 1.0500. My reasoning was that currencies were going to stay relatively calm ahead of the big risk events this week and so that may lead to more attention being paid to the option expiry and its affect on the spot price.
Last night I took a small long at 1.0415 and I rode it all the way up to expiry, a massive 30 pips. It was a test to see if we ran all the way up near 1.05 but it didn’t even look like breaking 1.0450. The effect at the expiry was non existent.
$3.5bn?? Load of rubbish
So what can we conclude from my experiment? Bugger all really. Sometimes they have an effect and sometimes they don’t. They’re potentially worthless to trade except for the odd barrier and big panda DNT. So when we highlight options use them as a reason why a market might be behaving a particular way around the expiry time rather than as a forecast tool for prices.
