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Oct 09 - 08:55 AM

EUR/USD - COMMENT-Here's What FX Options Say About EUR/USD

By Richard Pace  —  Oct 09 - 07:00 AM

The forward-looking nature of FX options, their pricing and flows, can offer a useful insight into the outlook for a currency pair, but anybody looking for short-term EUR/USD moves shouldn't get excited.

Although EUR/USD is probing back above 1.1800 Friday, option players aren't rushing back to cover the possibility of more gains or setbacks.
Most bets are for a continuation of range-bound spot activity that lacks any real volatility within recent 1.1900-1.1650 parameters.

Implied volatility measures that.
Holders want actual volatility to outperform it, but implied volatility is edging lower.

However, risk reversals, which show how much implied volatility dealers place on direction, retain a EUR call over put premium, which shows topside is still considered the more vulnerable side of the market.

Flows are light and mixed, according to dealers.
Clients buying topside options are matched by sellers, although downside strike options are barely trading.

Massive expiries have been containing ranges this week.
There's 3 billion around the 1.1800 level Friday nL1N2H0070, with more big 1.1800 strikes next week.

A cheap EUR call bet can capitilise on limited EUR/USD gains nL1N2GX09N

Related comment nL1N2H009J

For more click on FXBUZ

EUR/USD 1-month implied volatility Click here

1-3-12-month EUR/USD risk reversals Click here

Refinitiv IFR Research/Market Commentary


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