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Feb 02 - 02:55 AM

EUR/USD - Watch EUR/USD Options - 1.20 Break Potential Increasing

By Richard Pace  —  Feb 02 - 02:24 AM
  • It's been slow to materialise, but downside fears increase in FX options

  • Premium for EUR puts over calls (downside protection) tests new recent highs

  • 1-month risk reversals paid 0.225 EUR puts over calls Tues, vs 0.1 early Mon

  • 3-month loses EUR call premium - now neutral, and 1-year sold 0.25 EUR calls

  • These EUR puts (spot downside) premiums are new highs since June 2020

  • Means further spot slide will lift implied volatility, reward option holders

  • 1.2000 holds big option barrier/stops, break can increase volatility/losses

  • Further option premium increase would highlight growing 1.2000 vulnerability




For more, click on FXBUZ


EUR/USD 1-3-12-month expiry option risk reversals Click here

1-month EUR/USD implied volatility Click here

Source:
Refinitiv IFR Research/Market Commentary

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