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Jan 09 - 07:24 AM
EUR/USD - COMMENT-EUR/USD Traders Despair - Implied Volatility At Record Lows
First appeared on eFXplus on Jan 09 - 05:00 AM

EUR/USD implied volatility determines the price of option premiums -- it's heading back toward late 2019 record lows, which is very telling! The EUR/USD rally to four-month highs at 1.1240 in late December helped to boost implied volatility on hopes of further spot gains and renewed volatility, but big technical resistance and corporate selling thwarted that.
Without actual spot volatility and directional moves, options can't profit, so it's no surprise to see their premiums falling.
The benchmark one-month implied volatility peaked at 5.1 on Jan.
2, but now it's homing in on its pre-Christmas record low at 3.85.
Implied vols on other maturities are doing likewise.
Strong EUR/USD support resides at 1.1100-1.1050 nL1N29D0D3 and big resistance above 1.1200 nL1N29C05W, reinforcing the limited range and option volatility pressure.
However, option dealers are still charging an implied vol premium for EUR calls over puts (EUR/USD gains over losses), and although it's relatively small, it does suggest that for now EUR/USD's topside still appears to be the most likely eventual escape route.

EUR/USD risk reversals: Click here

EUR/USD implied volatility: Click here

Refinitiv IFR Research/Market Commentary


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