FX Options Insights & Next Weeks Big Expiries
The U.S. monthly employment figures met expectations and, following some initial fluctuations, the foreign exchange market stabilized while implied volatility diminished heading into the weekend. Familiar trading ranges in FX are likely to continue until there is clearer insight into the impacts of U.S. tariffs on growth and inflation. This situation is expected to maintain pressure on implied volatility for 1-3 month expirations, although longer-term dates seem to have better support recently. Nonetheless, all expiration dates remain above levels recorded before the implementation of reciprocal tariffs on April 2, indicating a heightened risk of sporadic increases in FX volatility in the current climate. Range binary options have been quite lucrative as wider ranges persist, many of which were set up in April to align with U.S. President Donald Trump’s 90-day tariff reprieve ending July 8. The implied volatility premium for USD puts relative to calls, as indicated by risk reversals, is decreasing from the long-term highs reached in April and May, yet it still remains significantly above previous levels. Coupled with sustained demand for direct USD put options from lower levels, this reflects a market that is still forecasting further USD weakness over time.
The cash hedging associated with upcoming FX option strikes may enhance the nearby support and resistance levels, potentially creating a draw on FX price movements leading up to each day’s 10 a.m. New York cut expiration. Thus, it’s beneficial to know the location of significant strikes in advance.
There is an abundance of G10 FX option strike expiries following Friday's U.S. Non-Farm Payroll data, which are available here. Significant EUR/USD strikes for Monday, June 9, include 1.1300 and 1.1350, each with nearly 1 billion euros, 1.1425 with 2.4 billion euros, 1.1500 with 1.7 billion euros, and 1.1600 with 2.7 billion euros. On Tuesday, strikes between 1.1400-25 total 3.5 billion euros. Wednesday sees 1.1300 at 3 billion euros, 1.1400 at 2.5 billion euros, and 1.1500 at 2.1 billion euros. Thursday has strikes at 1.1300 with 1.4 billion euros, 1.1350 with 2 billion euros, 1.1400 with 2.9 billion euros, 1.1450 with 2.6 billion euros, and 1.1600 with 1.7 billion euros. On Friday, June 13, strikes at 1.1400 and 1.1500 are each valued at 1.3 billion euros.
For GBP/USD, the largest strikes expire on Monday, June 9, at 1.3650 with 350 million pounds, Wednesday at 1.3450 with 676 million pounds, and 1.3600-05 at 650 million pounds, while Friday has 1.3400 at 620 million pounds. The EUR/GBP strikes are on Monday at 0.8440-50 with 650 million euros, on Thursday at 0.8350 with 500 million euros, and between 0.8480-0.8500 with 650 million euros, and on Friday at 0.8475 with 775 million euros.
Noteworthy EUR/CHF expiries occur on Thursday, June 12, at 0.9375 with 650 million euros. The largest AUD/USD strikes next week are on Monday, June 9, at 0.6500-10 with A$770 million, Tuesday at 0.6420 with A$941 million, and 0.6460 with A$600 million. Wednesday sees 0.6495-0.6500 with A$800 million, and Thursday includes strikes between 0.6475-0.6500 with A$2.4 billion, and 0.6600 at A$800 million.
Significant USD/CAD strikes expire on Tuesday, June 10, at 1.3695 with $777 million, Wednesday at 1.3760 with $750 million and 1.3800 with $650 million, and Thursday at 1.3750 with $700 million. The largest USD/JPY strike expiries next week fall on Monday between 143.55-65 with $1 billion and 144.00 with $900 million, Tuesday at 143.90-144.00 with $1 billion, Wednesday at 143.00 and 144.30 with nearly $1 billion each, and Thursday at 143.00 with $1.6 billion, between 143.30-55 with $2 billion, and 143.85-144.00 with $1.2 billion.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!