A big increase in FX option implied volatility reflects the uncertainty and higher risk of actual volatility in FX markets, but this could be advantageous for those who think EUR/USD will cling to its recent and familiar 1.0500-1.0950 range.
A Double-No-Touch range binary is a short volatility trade but without the unlimited risk if actual volatility should outperform over the life of the options.
The trade is a bet that 2 strikes, one either side of a chosen range, will remain untouched through the life of the option.
A 1-month expiry 1.0500-1.0950 range binary has a premium of 15% of total payout, so more than a 6:1 return.
That's with spot at current 1.0675 and a 1-month implied volatility at 9.4.
The option can increase in value if implied volatility falls and for every day that the range remains intact.
Recall EUR/USD met decent demand on setbacks toward 1.0500 last week and hasn't been above 1.0950 since making a new 10-month high at 1.1034 on Feb 2.
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