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Jun 18 - 11:55 AM

EUR/USD - Massive FX Option Trade Highlights Downside EUR/USD Fears

By Richard Pace  —  Jun 18 - 09:50 AM
  • Big repricing of downside EUR/USD risk premium via options

  • Implied vol for EUR puts over calls on risk reversals to new long term highs

  • 1-month expiry 0.15 to 1.5, other expiry dates to 1-year above 1.5, too

  • Huge trading of outright downside strikes continues on Tuesday

  • 3-month expiry 1.0200 EUR put USD call paid 9.1 implied vol on 2-bio euros

  • Premium around 26 USD pips, break-even 1.0174

  • Market clearly short downside which boosted EUR put premiums/price surge

  • Price action reinforces the negative spit/positive volatility correllation

  • In other words - EUR/USD weakness will drive FXO implied volatility higher

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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