Billions in FX option strikes strangle EUR/USD
Nov 20 (Reuters) -Soon-to-expire FX option strikes attract the most cash-related hedging flows which can help to restrict volatility and contain the FX spot price. There are billions of euros of nearby EUR/USD strikes expiring this week and they continue to grow.
EUR/USD has reverted toward 2.4 billion euros of 1.0540-50 strikes that expire at 10 a.m.New York/3 p.m.London on Wednesday. There are another 1.8 billion euros between 1.0500-30 and almost 3 billion euros between 1.0585-1.0625.
Thursday's stand-out strikes are between 1.0535-50 on 2.1 billion euros and between 1.0600-10 on 2.6 billion euros.
The largest strikes currently due to expire on Friday are at 1.0500 on 1.7 billion euros and between 1.0530-50 on 1.6 billion euros and at 1.0600 on 2.1 billion euros.
There are some massive strikes in the same range on November 27, with 3 billion euros at 1.0500 and 4.5 billion euros between 1.0600-10.
There are said to be plenty of orders/positions in both spot and options in the 1.0450-1.0650 range which are also helping to shackle EUR/USD near term.
Friday's Eurozone PMI data is the main risk to EUR/USD, but if it fails to excite the market then current ranges could be sustained into next week.
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EUR/USD FX option strike expiries Nov 20-29 https://tmsnrt.rs/4hUvSlP
(Richard Pace is a Reuters market analyst. The views expressed are his own)
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