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Sep 16 - 07:55 AM

EUR/USD - COMMENT-Look At The FX Options Market For EUR/USD Clues

By Richard Pace  —  Sep 16 - 05:47 AM

Being a forward-looking FX derivative that thrives on volatility, FX options can offer clues about the outlook for the underlying FX rate, and they have been consistent with their view for EUR/USD.

Traded volumes in EUR/USD options picked up slightly last week, but the week prior had seen them at their lowest so far in 2021.

Implied volatility gauges actual volatility, both current and forward looking - it's been trading at pandemic lows for months.
There's typically a premium for implied volatility on options in one direction over the other, but in EUR/USD it has been close to neutral since June.
However, risk reversals, which show this premium, have seen a tiny increase for EUR puts over calls in recent weeks, suggesting EUR/USD downside is perceived as being slightly more vulnerable than the topside, for now.

One-week expiry options now capture the Sept.
22 U.S. Federal Reserve policy announcement, and an increase in 1-week expiry implied volatility shows dealers aren't complacent about its potential effect on EUR/USD volatility short term. nL1N2QI0LU



For more click on FXBUZ


EUR/USD 1-3-month implied volatility Click here

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

EUR/USD 1-week implied volatility Click here

Source:
Refinitiv IFR Research/Market Commentary

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