• FX options are forward-looking, volatility driven derivatives and can offer clues on FX sentiment

• Their price action shows a market getting more anxious about the downside risks to EUR/USD

• Recent trade flows have shown increased demand for EUR put/USD call options (downside strikes)

• These would benefit/protect those holding them if EUR/USD loses further ground

• One of many recent trades was a mid October 1.1400 strike on almost €1-billion late Tuesday

• Risk reversal contracts have increased premiums for EUR puts over calls - 1-week 25 delta paid 0.6 Wednesday

• The benchmark 1-month expiry risk reversal now 0.35 EUR puts over calls from a neutral bias last week

• Related - FX options wrap - Volatility premium plays down mounting FX risks
EUR/USD 25 delta risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)