Option levels in Forex trading
Exchange trading is considered easier than trading in Forex market: technical analysis works better, more information on the network, and many very useful data can be obtained absolutely free of charge from network resources of exchanges. Today we will talk about the CME exchange, which posts data on option levels for currencies.
By the way, stock exchange options are very different in their essence from the same binary options that everyone now has on hearing. Typically, big players use options mostly to hedge their current futures positions, though not so uncommon and common speculation. For any currency pair, both futures and options are available for trading. All data on the stock exchange, unlike Forex, is absolutely transparent - you can see the number of option contracts at any time and at the price of a strike determine the main market levels that the big players are likely to focus on.
CME Group Inc. is the Chicago Commodity Exchange Group, the largest North American financial derivatives market, built by merging Chicago and New York 's leading exchanges. The group was formed in 2007 through the merger of the Chicago Commodity Exchange and the Chicago Chamber of Commerce. The organization is headquartered in downtown Chicago. Later, on March 17, 2008, it was announced that New York Commodity Exchange subsidiary NYMEX Holdings and New York-based COMEX Exchange were joining the group. The final association was formalized on 22 August 2008. The three exchanges currently operate as a single market. Incidentally, on February 10, 2010, CME announced the purchase of 90% of the Dow Jones indices, including the most famous Dow Jones index.
Daily bulletin CME
Every day the CME Exchange publishes preliminary reports, which are issued at 7.45 - 8.40 Moscow time. The final report is issued within an hour of the beginning of the American session.
The data from this bulletin will allow us to calculate option levels and take them into account in our trade. The option level shows the quotation at which the option seller enters the break-even.
How the option levels are useful
The option levels can be perfectly applied to the definition of support and resistance zones, which we are perfectly convinced of. Such levels will be based on real stock exchange data, and they are interesting to large players. The logic of these levels is simple: if large traders sort out CALL options, it is likely that a short position on futures on these instruments is hedged in this way. As a result, CALL is a real resistance level, while PUT is a support level. You always have a choice - to draw levels in the old world, on the eye, or to "paint" them from the head of large players. It is worth understanding that where serious money spins, and preparation of players is completely different. It 's for the most part "smart money," but how smart professional traders would be is sometimes wrong and they are.
Another interesting fact that can help with trade: if the CME 's daily report is not out in time, large volumes, and, as a result, increased volatility, should be expected on this day.
Option levels are undoubtedly a very useful tool for any trader. Combined with fundamental and technical analysis as well as Price Action, it can turn into a very powerful tool. And instead of applying levels to the eye, guided by guesses, it is much more effective to use real market data.