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Sept 25 (Reuters) - FX options markets are flashing a clear warning sign this week: demand and premium for EUR put/USD call options have risen sharply, with 1.1300 strikes drawing particular attention. These options give holders the right — but not the obligation — to sell EUR/USD at a preset strike and expiry date, and the concentration of interest around 1.1300 is no coincidence.
The level carries technical significance. June's low, and the pair's weakest point since May 2025, sits at 1.1325, just above the psychologically important 1.1300 handle. Barrier and trigger options clustered at 1.1300 now hold the key to whether declines extend meaningfully further, making this strike a genuine inflection point for spot.
1.1300 EUR put/USD call options stand to gain in value on two fronts simultaneously. First, a break in spot below the strike would allow holders to exercise their right to sell EUR/USD at 1.1300 — a level above prevailing market prices — directly increasing the option's intrinsic value. Second, implied volatility matters just as much. Since future volatility is unknowable, implied vol acts as the market's proxy and is a key driver of option premium. It has already risen across the FX complex from long-term lows amid the latest leg of dollar strength, independently boosting option prices even before spot moves — and it would be expected to climb further still as EUR/USD falls, particularly on any break below 1.1300, adding a self-reinforcing tailwind to the move.
Risk reversals — which measure the implied volatility skew between equivalent EUR puts and calls — reinforce this picture. They have jumped sharply in favor of EUR puts over calls, reflecting stronger demand for the right to sell euros versus buy them, consistent with a market positioning for lower EUR/USD.
The shift has been swift. Risk reversals sat close to neutral heading into last week's Fed decision, with only a modest downside premium immediately afterward. Since then, the benchmark 1-month 25-delta risk reversal has climbed close to the late-July peak of 0.9 — a level not seen since April.
Any break below 1.1300 might ultimately prove temporary, but
an initial break could still trigger sharper, faster declines
before any recovery — precisely the scenario these hedges are
designed to reward and protect against. That the market is
pricing this risk so actively shows it isn't ruling out a break
of 1.1300, even if only fleeting.
EUR/USD FXO implied volatility
EUR/USD 25 delta risk reversals
(Richard Pace is a Reuters market analyst. The views expressed are his own)
