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Trading Forex – Option Expiry Orders – And How To Profit From Them
We’ll be explaining what option expiry orders are and how you can incorporate them into your trading. It’s definitely not an exact science but you can use the information to your advantage.
RECOMMENDED READING: FX OPTION EXPIRY ORDERS
If you’ve seen analysts mention option expiries you might have wondered what they’re talking about. Well, in simple terms, option expiries relate to positions being held by futures traders. The expiry is the time when those positions either have to be cashed in, realized for delivery or simply left to expire.
The first thing to mention here is that it’s very difficult to really know what traders will do at the expiry time, because we never know whether the positions are buying or selling the asset. So, we don’t know whether the expiry is likely to trigger any specific trading behaviour because the full details of those positions is not publicly available. All we can know for sure is that there is an order at the price and something MIGHT happen before it expires.
As a general rule, any orders that are over $600 million tend to act like a magnet for the price. This can be useful if you’re holding a trade and the price is approaching a large option expiry level. It means that your trade is less likely to actually move very far, until that expiry has passed.
As a trader you can factor this into your analysis and plan your trade management around these order levels. But don’t get too hung up on these levels and certainly don’t use them as the main basis for any of your trades.
At the end of the day, option expiry levels are useful information to have, but shouldn’t really alter your thinking over whether or when to take a trade or not.