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Jan 22 - 07:55 AM

EUR/USD - FX Options Aren't Betting On Sustained EUR/USD Gains

By Richard Pace  —  Jan 22 - 05:55 AM
  • Risk reversals gauge the FX direction most likely to generate volatility

  • They charge an implied volatility premium for strikes in that direction

  • 1-month expiry 25 delta risk reversals is considered as a benchmark

  • EUR/USD's downside strike premium has fallen to long term lows at 0.15

  • It's been this low on several occasions since Apr 2023 vs 3.5 in March 2022

  • However, it has not traded with a topside strike premium since November 2022

  • Option demand for topside strikes has so far proved limited, too

  • Adopting topside strike premium would reflect growing risk of EUR/USD gains

  • Low realised and implied volatility reflects current range trade

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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