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Oct 14 - 04:55 AM

EUR/USD - Big Option Expiry And Cheap Hedges

By Richard Pace  —  Oct 14 - 02:46 AM
  • 1.5-billion 1.1600 option expiry may help contain Thursday nL1N2RA0AV

  • FX option market retains a firm downside strike volatility premium for now

  • Implied volatility off highs, but 1-3-month EUR put holds 0.35-0.4 over call

  • That makes EUR puts with knock-out triggers below strike very cheap

  • 1-month 1.1600 EUR put cost $70-pips, add 1.1450 KO trigger and its $8-pips

  • Option gives holder the right to sell EUR/USD at 1.1600 at expiry

  • If trigger touched option dead - trigger distance from strike increases cost

For more click on FXBUZ

EUR RKO option Click here

EUR/USD 1-3 month expiry option risk reversals Click here

Refinitiv IFR Research/Market Commentary


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