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pentagram
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Joined: November 9th, 2010, 11:40 am

FX options quote by Delta, not strike

February 14th, 2021, 11:20 am

In equities vanilla options contracts have a fixed strike, their prices are also quoted per strike for a given maturity. While of course a Delta can be calculated at any point in time for a given option thus and the quote of an equities vanilla can in principle be converted to a quote for a given Delta, the contract is created by fixing a strike.

In FX, I'm aware prices are quoted for values of Delta, my question, is what does the actual options contract look like.  Ie regardless of the quoting mechanics, and what range of options the market chooses to quote at a given point in time - after an FX option has been bought, is it a fixed strike contract?, if so, where the strike is calculated given the FX pair spot at quote time? or is it that the strike is calculated given the FX spot at the time of buying (assuming spot moved since the quote time)?
 
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bearish
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Joined: February 3rd, 2011, 2:19 pm

Re: FX options quote by Delta, not strike

February 14th, 2021, 6:29 pm

As you surmise, the actual option contract will have a fixed strike and a premium expressed in units of currency. We’ll need somebody with current market experience to explain the exact mechanism for going from a quote expressed in terms of implied vol for a given delta to those contractual terms.