Explainer - U.S. election drives FX gamma to extremes
Nov 5 (Reuters) -The term "gamma demand" is circulating heavily in the FX market as the U.S. election approaches — but what exactly does it mean, and why is it significant?
Gamma is the rate at which an option's delta changes in response to movements in the underlying asset (the FX spot rate). Simply put, the more volatile the FX spot rate, the more an option's delta fluctuates, increasing the option's gamma. Options benefit from volatility in the FX spot market, and the upcoming U.S. election is expected to bring plenty of it.
Options with shorter expiries (typically under one month) and strike prices close to the current spot rate tend to have the highest gamma, driving up demand for these "gamma-rich" options. As a result, premiums for these options have surged to extreme levels across all currency pairs.
Implied volatility gauges the realised/actual volatility threat when determining the price of an FX option. One-week expiry FX option implied volatility has been trending significantly higher since including the U.S. election and from Tuesday overnight/next day expiry implied volatility has spiked to new long term highs, especially in MXN and CNH.
Those holding long gamma options will typically monetise them by regularly adjusting an opposing cash position which serves to neutralise exposure to the currency pairs direction, whilst capitalising on its realised volatility instead.
For more click on FXBUZ
Overnight expiry FXO implied volatility https://tmsnrt.rs/4hC4kkU
1-week expiry FXO implied volatility https://tmsnrt.rs/4fxoniQ
(Richard Pace is a Reuters market analyst. The views expressed are his own)
</body></html>
免责声明: XM Group仅提供在线交易平台的执行服务和访问权限，并允许个人查看和/或使用网站或网站所提供的内容，但无意进行任何更改或扩展，也不会更改或扩展其服务和访问权限。所有访问和使用权限，将受下列条款与条例约束：(i) 条款与条例；(ii) 风险提示；以及(iii) 完整免责声明。请注意，网站所提供的所有讯息，仅限一般资讯用途。此外，XM所有在线交易平台的内容并不构成，也不能被用于任何未经授权的金融市场交易邀约和/或邀请。金融市场交易对于您的投资资本含有重大风险。
所有在线交易平台所发布的资料，仅适用于教育/资讯类用途，不包含也不应被视为用于金融、投资税或交易相关咨询和建议，或是交易价格纪录，或是任何金融商品或非应邀途径的金融相关优惠的交易邀约或邀请。
本网站上由XM和第三方供应商所提供的所有内容，包括意见、新闻、研究、分析、价格、其他资讯和第三方网站链接，皆保持不变，并作为一般市场评论所提供，而非投资性建议。所有在线交易平台所发布的资料，仅适用于教育/资讯类用途，不包含也不应被视为适用于金融、投资税或交易相关咨询和建议，或是交易价格纪录，或是任何金融商品或非应邀途径的金融相关优惠的交易邀约或邀请。请确保您已阅读并完全理解，XM非独立投资研究提示和风险提示相关资讯，更多详情请点击 这里。
