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Jan 24 - 07:55 AM

AUD/USD - Options Have More Downside Potential

By Richard Pace  —  Jan 24 - 05:52 AM

• FX Option implied volatility slumped as Trump risk premiums pared this week

• Better risk sentiment/weaker USD help drive broader option premium decline

• Initial losses slowing but AUD/USD implied vols have more downside potential

• AUD/USD fair value historic/realised volatility is below implied volatility

• Post US election lows (Nov. 8) still a few ticks below current levels, too

• AUD/USD downside risk premium on 1-month risk reversal post election low 0.6
AUD/USD 1-month 25 delta risk reversal


AUD/USD implied volatility


AUD/USD implied vs historic/realised volatility


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

Source:
London Stock Exchange Group | Thomson Reuters

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