Euro Option Triggered

As I live in Asia, I tend to do options that are Tokyo cut 2pm. This means that on the expiry date of the option at 2pm Tokyo time, they will look at the spot price and depending on the type of option, will decide whether it gets exercised.

This specific option I had traded on the 7^th July, and it was a strangle vanilla option that I sold.

What is a strangle vanilla option?

This is a type of option trade where you play on a currency range that you are comfortable with. So you sell a call option on the top side, and a put option on the lower side.

Here’s my trade as an example.

2 months back in July, spot was around the 1.2500 levels in EUR/USD.

So I decided I’d put up a EUR/USD strangle trade.

I sold a EUR call / USD put at 1.2800

And I sold a EUR put / USD call at 1.2150

This meant that I was playing the range of 1.2150 and 1.2800.

 If spot on date of expiry was above 1.2800, I would have to take delivery of a sell EUR/USD position at 1.2800.

If spot on date of expiry was below 1.2150, I would have to take delivery of a buy EUR/USD position at 1.2150.

If spot remains in between 1.2800 and 1.2150, nothing happens and I just made a profit in terms of the premium I received.

So what happened today at expiry?

At 2pm Tokyo time, my option got triggered as spot was above 1.2800. Luckily for me, EUR/USD has been bearish, and is below 1.2800. I now have a profitable position, and I’m going to look at this position now as an intraday position.

Here’s my strategy:

I’m looking at Euro to drop further once the U.S session starts and I am expecting quite a bit of volatility tonight. I’m going to leave a stoploss order just above the pivot point at 1.2850, and will bring it lower as spot drops.

So let’s see how this works out!