One-week EUR/USD FX option expiry now captures next Thursday's European Central Bank meeting, but dealers haven't added much in the way of event-risk premium, which might be a mistake.

The ECB has already signalled more easing for December, potentially tweaking PEPP, LTRO and APP, so no surprises if they do, but any mention of the exchange rate can prompt a reaction, more likely after recent EUR/USD gains.

Implied volatility gauges actual volatility expectations over a given period and determines the option's premium - holders want actual volatility to outperform it.
One-week implied volatility reflects the spot rally, with an impressive 6.0 to 7.6 gain Monday-Wednesday.
However, even without Thursday's EUR/USD extension to 1.2139, today's 8.3 peak seems a timid gain from 7.6, given that it now includes the ECB announcment.
By comparison, one-week EUR/USD implied volatility added 1.5 when it first captured the September meeting.

Buying one-week-expiry implied volatility dips may therefore be prudent, or alternatively, consider two-week expiry, which also captures the U.S. Federal Reserve meeting and its own FX volatility risk.

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