technical analysis technical analysis technical analysis

FXO Market Update - Apr 05

Mathias Alrixon

OTC Derivatives Trading

Summary:  Market has shifted focus to the French election which has got some attention after Le Pen closing in on Macron in the last polls. The risk premium for the second round has moved higher and is currently priced at double a normal day, expected move around 1.2% in EURUSD. We have seen good demand to buy EUR puts over the last sessions with EURUSD 1 month risk reversal up from 0.9 to 1.5 for puts since Friday and ATM vol is up 0.5 to 8.4.

Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these.

FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week.
Source: Bloomberg, Blue: EURUSD spot

Market has shifted focus to the French election where the first round take place this weekend and the second round on 24th April. Market has treated it as a nonevent but the latest polls shows that Macron lead over Le Pen has narrowed from 13% to 7% for the first round while the polls shows 55/45% with Macron over in a potential second round race against Le Pen. Risk premium for the second round is priced with double weight compared to a normal day and expected move is around 1.2% in EURUSD. A Macron victory would most likely result in limited move in spot with EURUSD moving a bit higher while EURUSD could drop 2-3% if Le Pen wins.

As a result we have seen good demand to buy EURUSD puts over the last days with 1 month EURUSD trading 8.4, up 0.5 from Friday, and 1 month risk reversal has moved from 0.9 to 1.5 for EUR puts over the last days.

If you want to hedge/bet for a Le Pen victory then EURUSD put spreads have good value with the higher risk reversal or buy a OneTouch for the downside. For a Macron victory we like to sell strangles.

Le Pen victory:
Buy 1 month 1.0900 EURUSD put
Sell 1 month 1.0600 EURUSD put
Cost 56 pips


Buy 1 month 1.0600 EURUSD OneTouch
Cost 20%

Macron Victory:
Sell 1 month 1.0700 EURUSD put
Sell 1 month 1.1200 EURUSD call
Receive 50 pips

Spot ref.: 1.0975

Source: Saxo Bank
  • The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking.
  • Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”.
  • Change: The difference between current price/volatility and where it closed 1w ago.

FX Options Trading:

You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date

If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received.

By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited.

If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure.

Learn more about FX Options:

Forex Options – An introduction

Forex Options – Exotic options

Forex Options - Webinars


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.