FX Options
FX Option Chains
An option chain is a full listing of all option prices for a particular security, listed by strike price, expiration date, and whether they are calls or puts. When looking at an option chain, note that the option strike prices are typically quoted in denominations of .5. All calls will be listed to the left of the strike price column in the middle, all puts to the right. Below, we have the May options for EUI, which is the ISE FX Options tracking the Euro against the U.S. Dollar. As evidenced by the quote on top, EUI is currently at 76.73, which means it would cost €0.7673 Euros to buy $1 (.7673 X 100)
| May 09 Calls |
EUI @ 76.73 24 days to expiration |
May 09 Puts |
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| Symbol | Delta | Open Int |
Vol | Chg | Last | Bid | Ask | Strike Prices | Bid | Ask | Last | Chg | Vol | Open int | Delta | Symbol |
| EUI EK | 0.000 | 129 | 0 | 0.00 | 2.41 | 1.84 | 1.90 | 75.5 | 0.46 | 0.53 | 0.48 | 0.03 | 32 | 373 | 0.000 | EUI QK |
| EUI EL | 0.000 | 294 | 1 | -0.31 | 1.60 | 1.50 | 1.56 | 76.0 | 0.63 | 0.69 | 0.67 | 0.00 | 0 | 82 | 0.000 | EUI QL |
| EUI EM | 0.000 | 1.275 | 0 | 0.00 | 1.55 | 1.20 | 1.25 | 76.5 | 0.83 | 0.89 | 0.64 | 0.00 | 0 | 12 | 0.000 | EUI QM |
| EUI EN | 0.000 | 199 | 0 | 0.00 | 1.3 | 0.96 | 1.00 | 77.0 | 1.05 | 1.14 | 2.25 | 0.00 | 0 | 1 | 0.000 | EUI QN |
| EUI EO | 0.000 | 24 | 0 | 0.00 | 1.02 | 0.74 | 0.79 | 77.5 | 1.33 | 1.43 | 0.00 | 0.00 | 0 | 0 | 0.00 | EUI QO |
| EUI EP | 0.000 | 0 | 0 | 0.00 | 0.00 | 0.56 | 0.63 | 78.0 | 1.65 | 1.75 | 1.75 | 0.00 | 0 | 12 | 0.000 | EUI QP |
The Strike Prices for EUI Options are listed right in the middle of the chart, with information for calls on the left, and info for puts on the right. For the purposes of this example, we’ll be focusing primarily on the Bid/Ask quotes on these options, in relation to their Strike Prices.
As you can see, all calls with a strike price of less than 76.73 are “in the money”, and therefore have intrinsic value. Any of these options exercised allow the owner to purchase U.S. dollars at a rate of less than the current exchange rate.
We’re going to purchase 10 contracts of the May 77 calls, which are currently asking 1.00. As each contract is worth 100 times the premium, 10 contracts will cost $1,000.1
Note the relationship of our currencies: we are expecting the Dollar will grow stronger relative to the Euro, thus making it more expensive to buy U.S. currency. If the next day it costs €0.80 to buy $1, that would mean the Dollar strengthened resulting in a value of $80.00 for EUI. Likewise, the EUI May 77 Call options now have 3 more points of intrinsic value, and would now be worth approximately $4.00. The ten contracts could be sold for $4000.00, earning the investor a pre-tax profit of $3000.00.
1For the purposes of all examples, trades will not factor in other costs, such as commissions.