FXO Market Update - EURPLN vols are elevated
Summary: EURPLN back up to 4.7000 again and vols and risk reversals trades bid. 2 weeks and 1 month 25 delta calls both trades around 11.0 vol while 1 month realized spot vols is 7.7500.
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.
EURPLN is back up above 4.70 after trading up 1.25% yesterday. Resistance comes in at 4.7250, previous highs from last week and May.
Vols trading higher with 1 month up 1 vol from beginning of last week to trade 9.50. Risk reversals trades 3.25 for topside which is the high end seen over the last months. The risk premium also trades elevated with 1 month currently at 1.75. All the vol components expressing high values, i.e. making EURPLN calls expensive. With that in mind we like to sell EURPLN calls at these levels with strikes above the 4.7250 resistance. Both options below trades around 11.0 vol while the 1 month realized spot vol is 7.75, giving a high risk premium over current spot vol.
Sell 2 weeks 4.7500 EURPLN call
Receive 265 pips
Sell 1 month 4.8000 EURPLN call
Receive 330 pips
Spot ref.: 4.7150
- 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:
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