FX options study highlights case for algos

A newly published book studying the historical value delivered by foreign exchange options could highlight the case for algo execution tools to be developed in the options market

FX options study highlights case for algos
Jessica James

A newly published book studying the historical value delivered by foreign exchange options could highlight the case for algo execution tools to be developed in the options market, according to Jessica James, head of the FX quantitative solutions group at Commerzbank and one of the book’s three authors.

“Algo execution is all about mean reversion and option volatility is very predictably mean reverting, as well as being driven by very predictable calendar events such as data releases, so I think FX options could be very amenable to being algo traded,” says James.

The book, FX Option Performance: An Analysis of the Value Delivered by FX Options since the Start of the Market, was published by Wiley in May and provides a practical guide to the value of FX options based on detailed analysis of historical data.

“Over the years I had noticed that long-dated options often seemed to be better value than short-dated options but it wasn’t until I did more systematic analysis that I discovered some of the trends explored in the book,” says James.