option expiries and risk reversals, a plain English guide

[Shadow Trader]

A couple of options terms come up on forums that rarely get a clear explanation.

An option expiry is the moment an option contract ends. Large currency options often expire at 10:00 New York time, called the NY cut. If a big pile of strikes sits near a price, some traders argue that the spot price gets drawn toward that level into the cut, since dealers hedging those options buy and sell the currency as it approaches. That idea is debated. Sometimes price pins, sometimes it ignores the level completely.

A risk reversal is the price difference between call options and put options at the same distance from the current price. It's quoted in volatility terms. If calls cost more than puts, the market is paying extra for upside protection. If puts cost more, it's paying for downside. That makes it a sentiment gauge, not a prediction.

For a scalper neither is a signal. The value is context. A big expiry near the current price may explain why a pair feels glued to a level. A strongly skewed risk reversal can hint that traders are nervous about one direction.

Data on expiries often comes from bank research notes, and the detail varies by source.

Does anyone track expiry levels before the NY cut, and has price really pinned to them often enough to matter?