• EUR/USD higher again Wednesday, but options focus on volatility protection

• 1-month expiry implied volatility eyes Mons 11.25 2-year high vs 9.3 Tues

• Butterfly spreads sought when volatility is excessive - now highs since 2022

• However, risk reversals, which gauge directional risk are slower to react

• They increased topside over downside premiums to highs since 2020 last week

• Topside premiums had been fully erased by Monday and now struggle to recover

• Related
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


EUR/USD 10 delta butterfly spreads

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