FXO Market Update - USDMXN back to the middle of the range.
Summary: USDMXN spot is back below 20.00 and in the middle of last months’ range. Vols have traded lower over the last week as spot has moved away from the highs but there is still room for vols to trade lower with spot at current levels.
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.
USDMXN is back below 20.00 and to the middle of the last 3 months range of 19.50/20.65. Vols have traded lower as spot has moved away from the highs at 20.65 but still trades higher than when spot been around these levels earlier during the last months. 1 month currently trades at 11.50 but there is room to move down another 1-1.5 vol if spot stick around these levels for a while. The next big event is US CPI in two weeks so there is good chance vols will continue drift lower and spot stay around these levels.
Risk reversals still on the high side and have not come down as much compared to the ATM vol when spot moved lower. USDMXN top side offers best value with the high risk reversal but we prefer selling strangle for the extra premium.
Sell 1 month 20.5000 USDMXN call
Receive 1,000 pips
Sell 1 month 19.5000 USDMXN put
Receive 420 pips
Spot ref.: 19.9250
- 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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