(Adds charts )

• A break of huge 1.1000 option barriers/triggers could flip EUR/USD option positioning to short gamma

• Short gamma would drive downside short covering via spot and options and increase volatility

• FX options continue to hedge the risk via binary and digital options - recall HF demand led the charge last week

• Implied vol and and EUR puts eased as spot recovered mid 1.12's Tuesday but still well above prior lows

• Latest spot dip sub 1.1200 reignites demand - 1-month implied vol 6.6 - after 7.3 to 6.25 setback Mon-Tues

• 1-month 25 delta risk reversals back over 1.0 and 3-month paid 1.0-1.15 EUR puts over calls
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)