What does Eur/Usd options expiring at 1.2750 means?

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philipjb

Can someone who trades options, please explain me, what does it means, when a new afloats in the market such as

Options Expiring for Eur/Usd at 1.2750

How does it affects the Spot Market ?
What does it mean by the expiry ? Does it mean spot price need to go in that level, meet the expiry of option, and than the price will go upside or downside.

Appreciate your detailed response. thanks.
 
that means that the settling price for euro dollars is 1.275
meaning 1.275 dollars equals 1 euro dollar.

options, if you have the 1.25 strike it is in the money and the 1.30 strike is out of the money.
 
Quote from philipjb:
Can someone who trades options, please explain me, what does it means, when a new afloats in the market such as

Options Expiring for Eur/Usd at 1.2750
More...
Options have an expiration date (usually the 3rd friday of the month; like was the case today). The above statement just says at exactly the expiration time the price was the said value... ie. the "closing price" of the said options (or of the underlying "asset")...

Take a look at this one:
http://finance.yahoo.com/q/os?s=FXE&m=2012-12-21
 
Ok,
But does it affects the Spot Price?
When we get such news in the news feed.
Does it like the Spot price will be than moved in the direction of the strike or away from it ?
 
Now,
I just got a message like this

EUR/USD
Offers - 1.2780
Bids - 1.2700
Vanilla option expiries - 1.2720

So what does this mean.. and how it affects spot price..
Will it go near 1.2720 ? or away from it.
 
Quote from philipjb:

Now,
I just got a message like this

EUR/USD
Offers - 1.2780
Bids - 1.2700
Vanilla option expiries - 1.2720

So what does this mean.. and how it affects spot price..
Will it go near 1.2720 ? or away from it.
More...

You are right option expiries are something different

http://www.forexlive.com/blog/tag/option-expiries/

http://www.forexlive.com/blog/2012/11/01/option-expiries-updated-45/

There is an explanation in a comment

One observation noted over the years is the powerful magnetic attraction of market prices to large expiries of so-called vanilla (plain ordinary puts and calls) options.
All things being equal (are they ever?) prices tend to gravitate toward the strike price at the time of expiry.
Why?
Because each side of the trade has to actively hedge their exposure.
Let’s use the example of a $500 mln JPY put/USD call struck at 100.00.
One side has an exposure of $500 mln dollars when the market is at or above 100.00 and the other side has no exposure. At 99.99, the other side of the trade has a $500 mln exposure and the other side has zero. All the jockeying back and forth tends to draw prices close to the strike as each side tries to position themselves for the moment when the option is exercised or expires out of the money.
This action is most noticeable in the run-up to 10 am New York time when the vast majority of options expire.
More...

It might be that these options are American options so ptions @ this price can be exercised.

You should rephrase your question so we can get the answer from a more experienced forum member .
 
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