What is Daily Option Expiry Levels
Daily Option Expiry Levels of the call or put option contracts can be used to hedge risk against a fluctuation in the exchange rate or to speculate on the option contract that may increase in value by the time of its expiry. For each option contract there is a seller and buyer.
At the time of expiry settlement between the buyer and the seller takes place. If the exchange rate for put options at expiry is lower than the strike price of the contract the seller takes loss and the buyer makes profit which is equal to the difference in current exchange rate and strike price and vice versa.
Due to option contracts expiring at a certain time and date there is somebody who makes profit and those who take loss. Hence for a certain participant having an open position with option contracts it is profitable if the price would move in the direction which is suitable for their needs.
For example for the seller of put options it is preferable that the current exchange rate would stay above the contract’s strike price until the time of expiry so he could keep the premium from selling of the put option contract rendering sold contracts worthless on expiration for their buyers.
Simultaneously the buyer of the contracts is interested that the price would stay below the strike until the time of expiry so they could make profit.
Expiry time for the basic plain options is set at 10.00 am NY (15:00 GMT). If the price is approaching an expiry level and the volume and open interest are large (OI ~500 m. or ~5000 contracts) the price action is tend to be affected as battle ensues from both buyer and seller. There are no much details of whether it’s a “put” or “call” but the price action leading up to the event is what traders are looking for.
How to use Daily Option Expiry Levels
Large volume- and open interest-laden levels “magnetize” the price so that most of the time, the price is targeting them but rarely touches (2-3 times per year) making it a good mark for estimation of price direction and possible stop-loss levels.
Subscribe for the daily Chicago Mercantile Exchange Daily Bulletin Summary at http://zentrade.online/tag/cme/ to receive daily reports on Daily Option Expiry Levels with maximum open interest. Using this information you will always know the direction and what levels the price is currently targeting.