• FX volatility is an unknown, yet key parameter of an FX option premium

• Implied volatility is an estimate for FX actual/realised volatility

• If realised matches implied volatility over life of option - premium covered

• Any more/less realised volatility decides profit/loss

• This makes FX volatility a tradable asset with options providing the vehicle

• Historic volatility is past realised volatility and a fair value measure

• Benchmark 1-month GBP/USD implied drifts lower to mid 6's of late

• 1-month daily historic volatility has recently edged up to the mid 6's

• A repeat performance of past months GBP realised volatility covers premium

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