Optional forex levels
It is considered that working in stock markets is easier than in foreign exchange. Because there it is possible to apply technical analysis more qualitatively, a lot of additional information can be downloaded from the online storage of the exchange, and more additional data can be found on the network. Today we will consider the Chicago Commodity Exchange “CME Group Inc.”, which provides information on option currency levels. We also need this information for successful work in Forex.
This approach is based on the statement that the option levels to some extent reflect the accumulation of funds and allow us to conclude about the distribution of the forces of bulls and bears.
Under current US law, the exchange is obliged to maintain strict daily reports on the fact of operations conducted on contracts for futures and options. The publication of reports (daily bulletin) is held five days a week (Monday and Sunday – exceptions), in the morning during the period from 7:45 to 8:40. Reports are preliminary and final (respectively preliminary and final). At the beginning of the American trading session, you can see the final.
Where to get information
Display format – CME bulletins for the 5th day of the week, except Mondays and Sundays. You can see the data on the transactions for the previous trading session and make your analysis.
For this we need the following sections:
- 27 (CALL to GBP);
- 28 (PUT to GBP);
- 29 (CALL on CAD);
- 30 (PUT to CAD);
- 33 (CALL to JPY);
- 34 (PUT to JPY);
- 35 (CALL to CHF);
- 36 (PUT to CHF);
- 38 (CALL and PUT on AUD and NZD);
- 39 (CALL and PUT to EUR).
Clicking on the desired option, you will receive an open newsletter filled with a variety of different information.
As it is easy to see, the bulletin contains various assets: indices, currencies, agriculture, precious metals, interest rates, there is even information on futures and options for weather changes.
Having found the FX currency section, let’s consider, for example, Call options on the Japanese Yen (PG 33)
How to trade at option levels
For us, such items in the column are important:
- Strike – the price at which the option was exercised.
- Volume Trades Cleared (or volume) – the total number of contracts (including open and closed).
- Open Interest – the number of open contracts at the current level. The next column indicates the changes for a specific date for this level (+ or -), UNCH means everything is unchanged.
- Set Price – risk premium.
- 1st column – Oct17, Nov17, etc. – indicates the expiration date of the option.
Calculate option levels for today
For calculation, consider an example based on CALL options for euro / dollar (PG 39). We look through the report down and find the main columns with parameters. You can sort in different ways – by the criterion of volume or interest. The most appropriate option is considered “open interest”.
Choose the largest Ol, it is equal to 2063.
The calculation of the CALL option for the EUR / USD tool is as follows:
CALL level = Strike * 0.001 + Bonus * 0.001.
1040 * 0.001 + 0,0120 * 0.001 = 1.040
As a result, we arrive at a value of 1.040.
Why not take into account the minus sign in Sett Price? Because it reflects the change in premium size. For a pair of euro / dollar multiplication factor is 0.001. However, it is different from other couples. For example, for some it will be 0.01, and for dollar / yen it is 0.0001 (in this case, we multiply the strike by 0.00001).
For reverse instruments – USD / CAD, USD / JPY, USD / CHF – the levels are calculated according to this scheme:
Level = 1 / (Strike * 0.001 +/- Premium * 0.01), the “-” sign is required to calculate PUT-levels.
For the USD / JPY pair, a different formula is applied:
Level = 1 / (Strike * 0.00001 +/- Premium * 0.0001).
Calculate the PUT level for euro / dollar
We find the maximum interest, but now in “EURO FX PUT”, in this case Ol = 6937. The main difference from the previous calculations is that for put you must subtract the premium from the strike:
PUT level = Strike * 0.001 – Premium * 0.001. Let’s teach the value of 1.0850.
It remains to note the values on the graph:
See how interesting these forex options levels are located. It is easy to see that they can be used as an analogue of support and resistance. But if the usual levels simply paint offhand, then the options can tell us about the actual volumes operated by large market speculators. The levels we inflict are called “first-order option levels,” and also “market boundaries.” Powerful players are clearly not interested in the price going beyond these limits. And although the prices in most cases are repelled by the levels, but not always – the exceptions are about 5%.