Thread: David Rodriguez - Using Options to Trade Currencies

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An in-depth view of currency market sentiment as it relates to options markets and publicly-available CFTC Commitment of Traders data. The CFTC publishes a weekly report on positioning in futures markets, giving clear and reliable information on market sentiment. Yet said data is only available once per week and works on a four-day delay—making it less useful as a market timing tool. We use FX Options Risk Reversals data to fill in the gaps. Historical relationships show that risk reversals track Non-Commercial positioning as measured by the COT. Thus we are able to track positioning data as provided by the COT, comparing it to sentiment in FX Options markets.

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Hi Rodriquez,-Do you mind telling me how to calculate the Risk Reversal number? -Which of the four groups in the CFTC report belongs to the Non Commercial? Dealer/intermediary, asset managers/instuitutional, Leveraged funds, other reportables?-I suppose I will need to substract the futures only report from the futures & Options report in order to get the- Options only figures. Kindly confirm.How does volume come into the picture?--Many thanks--Samuel Oyeniyi

I'd like to recreate your study.

I'm having a difficult time finding the correct historical fx options data. Do you have any site suggestions?

The best site I've found offers 1 yr of GBP data from ISE and 3 years of BPX which I believe is the same. Is the BPX ok to use? Do you recommend ISE or CME?

Also if anyone wants to split the costs of the data please IM me.

Originally Posted by qtmspin

I'd like to recreate your study.

I'm having a difficult time finding the correct historical fx options data. Do you have any site suggestions?

The best site I've found offers 1 yr of GBP data from ISE and 3 years of BPX which I believe is the same. Is the BPX ok to use? Do you recommend ISE or CME?

Also if anyone wants to split the costs of the data please IM me.

I personally use OTC FX options data through the Bloomberg professional service. And though I can't vouch for results using ISE data, I think they should be quite close. Let me know how it goes and what you find.