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May 16 - 06:55 AM

EUR/USD - Option Prices Are Falling For A Reason

By Richard Pace  —  May 16 - 04:35 AM
  • Event risk priced out of EUR/USD options post CPI - implied volatility hit

  • 1-week implied volatility from 6.5 to 5.0, now 5.35 (2024 range 8.75/4.0)

  • 3-June expiry 1.0935 strike sold 4.9 vol - premium/break-even 25 USD pips

  • 1-month expiry implied vol 6.1 to 5.5 post CPI (2024 range 7.5-4.9)

  • June 12 US CPI and Fed policy announcement may limit deeper 1-month decline

  • 1-month expiry risk reversals downside vs upside strike premium at l-t low

  • Falling implied volatility typical in lower realised volatility regime

  • Huge expiries may help contain EUR/USD, at least short term nL1N3HJ0GN

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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