EUR/USD: Options market shows evidence selling has substance behind

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 16, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    FXStreet (Bali) - The options market, during its Thursday activity, shows a substantial increase in 'in the money' puts for the EUR/USD Nov contract, suggesting that there is an increasing number of option market participants betting for directional bearish moves.

    EUR/USD bear move backed up by options market

    As per Thursday Oct 15, the 'in the money' put contracts saw an increase of 214, which was complemented by a massive spike of 2,506 new 'out of the money' calls. Meanwhile, 'in the money' calls only increased by 27, the 'preliminary data' published by the CME notes, with 537 'out of the money' puts. Note, the 'out of the money' call contracts indicate a cheap insurance against a directional play, meaning that in case EUR/USD were to break higher, those betting for a directional bearish bet have some protection.

    The more activity on an 'out of the money' contract, if backed up by 'in the money' directional play, the more it offers evidence that option participants are pricing a particular direction. Based on Thursday's action, that direction appears to be down, further supporting the fact that the bearish outside day turnaround on Oct 15th has substance behind.
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