So I usually trade equity options but I'm looking into trading forex since FX market hours allow for more trading opportunities. I'm wondering if there's a way to trade options on forex pairs. I usually only trade market neutral strategies (straddles, strangles, etc.) and I've tried looking into doing this with forex but haven't found anything. The closest thing I've seen is Oanda's box options but they seem to be more of a gambling tool where the "house" wins most of the time statistically speaking. Thanks! submitted by
Hey guys. I don't usually do GBP/USD, but it's suddenly become one of the most interesting pairs in my opinion, because I believe some very big moves are afoot. I'm going to mostly be looking at the long term view in the context of market positioning, so this might not be all that helpful for scalpers ;)
I want to start with the Daily FX SSI (Speculative Sentiment Index) reading for GBP/USD, which is quite something: http://i.imgur.com/pFcbIij.png
(© 2014 DailyFX)
There are 9 traders short for every one long. Basically the entire retail crowd is betting against the trend. This means that the majority of orders in the market will be stop losses near current levels.
Also worth a watch is John Kicklighter's video for the week, focusing on the S&P and GBP/USD: http://www.dailyfx.com/forex/video/daily_news_report/2014/02/14/Forex_Weighing_Reversals_for_SP_500_USDollar_GBPUSD.html
For those new to this kind of thing, sentiment analysis is just analysis using what you can know about market positioning, and how the market generally "feels" about a currency pair. Usually SSI gives quite reliable indications of when a trend will continue, because the majority of retail traders will start betting against it. Their stops add fuel to the fire when it continues. (This is also why I'm short AUD/USD - 2 traders long to every 1 short. Not extreme yet, but it means there are lots of stops below).
Before I get into too much detail there, here's the weekly chart: http://i.imgur.com/Ef4VRQf.png
(Yes I'm long)
I've put some tentative levels there, but I'll do more precise ones in a minute. As you can see, price is breaking out of a long term wedge. It hasn't quite cleared the range yet, and 1.700 is a massive wall to get over. There will be enormous interest at this level, not to mention some extremely large option barriers.
But I think it will break it eventually. Why I think it will go higher? Well, market positioning for one, but also this: http://www.cityindex.co.uk/market-analysis/market-news/24551832014/sterling-at-fresh-3-year-highs-eyes-more-gains/?cid=0000215115
Good analysis piece pointing out that GBP/USD is only about 6% away from the 200WMA. Deviations from this average have historically been much larger. Since price is clearly moving away from this level, I believe we can expect quite a large move as the market unwinds its short positioning.
A look at Oanda's orderbook (or the order boards posted at ForexLive) can give us a more precise view of where these orders are sitting: http://i.imgur.com/FEn4h3O.png Current Positioning & Open Orders
As you can see the market is severely short, mostly from the last 100 pips or so. 1.6600 is an area where a lot of positions, both long and short, were established.
There are clusters of buy stops above 1.6700 (small), 1.6750 (bigger) and then above 1.6900 there are two large clusters of buy stops.
Further, there are more buy stops above current price than there are sell orders, meaning that there is ample room for price to continue higher. They're mixed in with some mid-weight sell orders around 1.6800, so this is a level that should provide resistance.
Going a bit lower, we find that bids (both those wanting to initiate new positions and those wanting to take profits on short positions) should provide extreme levels of support.
These are in at about every 10-15 pips between 1.6600 and 1.6500, with the largest cluster being at 1.6500. Going on this alone, buying any dips below 1.66 looks really good. Beware the retracement
Bear in mind that there are sell stops
below 1.6700 - these are the weaker longs or those wishing to enter short on a break below the figure. These could accelerate a correction down to 1.6650 quite quickly.
Here's the 4hr chart, with the largest bids and offers put in. You'll notice that they line up quite nicely with just about any other method of calculating S&R. Dashed lines are larger orders, dotted ones smaller. The big box is where there are too many orders to make lines for :P http://i.imgur.com/C1htngr.png
Hopefully that's helpful.
Now, there's also a fundamental component to consider. The UK's recovery is looking fairly solid, while the market is very quickly losing its patience with the greenback. Over the last quarter my bullish USD bias has evaporated, as it was predicated on the market not having priced in the full effects of the taper. Now that it appears this is not the case, I have no choice but to change my USD bias to neutral/bearish. The recent soft data also indicates that the recovery is lagging that of the UK's quite badly. The market's reaction to positive US data is generally muted, and when something can't rally on good news, it's usually bad news.
Another thing to note is that the DJ FXCM Dollar Index declined throughout the last dip and recovery in the S&P - one of the longest sustained bearish moves in history. It was only half the magnitude of the other declines of this length, but most other 6-7 day consecutive declines in the dollar have preceded much greater bear waves, not recoveries. The logical thing to do is to look for a USD bounce and sell it.
We need look no further than the S&P to see what's happening here: http://i.imgur.com/YrCT8tA.png
(4hr chart with GBP/USD overlaid in white)
Sterling not quite a safe-haven yet. If 1850 goes in S&P, expect GBP/USD to continue higher. However, Daily RSI on both is currently showing bearish divergence (shown on charts - it's a daily RSI despite it being a 4hr chart)
This means that we might head slightly lower before bouncing. Trend line support for the S&P comes in at around 1775, which would imply quite a serious fall in Cable before buyers really step in. The level I really like? 1.6475
There is a large cluster of buy orders just below 1.6500, which I believe is where the smart money is looking to enter. This move would flush out a lot of weak longs, leaving plenty of space for new positions. Sellers will also be taking a lot of profits off here, giving us a very good chance of a bounce. From there all it will take is a move back above 1.660 to really get moving.
So longer term I would look to start long positions between 1.6600 and 1.6475, with stops below 1.6250 or the 100DMA
Targets would be completely open. I will look to exit the position if and when speculative sentiment drops back to more natural levels, or perhaps even reverses. Stops will be trailed to lock in profit, but not aggressively.
I realize OANDA charges a large "commission" on these options, but still think they can be useful in some cases. option-pricing software share improve this question follow Speculate on fast-moving forex prices using the powerful OANDA Trade platform and MT4. Risk management orders. We offer a full suite of risk management orders, including stop-loss orders. Protect your trades against unexpected price swings, especially during volatile market periods**. OANDA Trade mobile and tablet app . Access our full range of FX pairs using our native apps for Android ... Oanda just updated FXTrade. One long overdue addition is the ability to draw Fibos now. Still only very basic charting ability, though. But they have added a new way to trade called "Box Options." Box options use the same basic principles as the regular options market many of you know and love, but it appears to be Oanda internal. I also attempted oanda box options before. I feel the reward for the risk ratio is less and with so many complaints of quit hunting at oanda (I had few bad experience with them but money involved was less), I think that it would be good to do this at greater time frames where price is not too near the box. Special feature: One of the notable features of OANDA is the ability to make your own ‘box options’ in real time. This way the broker allows you to mark your indicators on the charts so you can track the currency pairs to find the next move. Spreads start from 1.4 pips. Spread types: variable. Maximum leverage is up to 50:1. DISCOVER INNOVATIVE TOOLS FOR TRADERS. Forex Order Book. A 24 ... Interview with Dr. Richard Olsen and Dr Michael Stumm, the masterminds of Oanda and FXBoxOption talk to us about their option products. Boxoption is a digital option - which allows a trader to trade a market in a very user-friendly and intuitive way. It enables the trader to put on a trade that corresponds his market view, i.e. he can place the box over the area, where he expects the market to ... Yes I use box options to handle long-term swing positions. This specific egy is vulnerability based that profits from ranges and attempts to ch trends so the duration is extended. I loe the four week prices are usually reasonable and use them to protect places that become exposed.
OANDA's web fxTrade platform offers a wide variety of charting options, including chart styles, adding technical indicators and using drawing tools including... The following video will demonstrate the various ways of placing buy and sell orders and managing positions on OANDA's Web based Forex Trading Platform. Open... See our broker comparison page: http://www.informedtrades.com/522074-forex-brokers-review.html KEY POINTS 1. In my personal opinion, Oanda is a great choice ... OANDA Review: A Great Option for Low Cost Traders - Duration: 7:48. ... or Transfer Funds from a Live or Demo OANDA Forex Trading Account - Duration: 5:38. Optimus Futures 5,178 views. 5:38. OANDA ... OANDA Review: A Great Option for Low Cost Traders - Duration: 7:48. InformedTrades 25,819 views. 7:48 . Build Your Own Forex Trading Robot - It's Easy!!! - Duration: 5:55. Steve Fleming 171,562 ... OANDA Forex Education ... 2:29. OANDA Review: A Great Option for Low Cost Traders - Duration: 7:48. InformedTrades 25,665 views. 7:48. Oanda Platform - Beginner Tutorial 101 in less than 10 ... For Oanda Tutorial go to 17:30 Web Site: Simpleforexoptions.net (Description) Forex Signals: Simpleforexoptions.net/forex Trend Racer Indicator/System: https...