Daily vols for Europe

Most option prices are relatively flat from their recent highs, with few players willing to short the market. Interestingly, many traders are facing time decay issues up until Friday, so we’ve seen a few sellers of O/N in EURJPY and AUDUSD in the market.

A stagnant spot market in Asia has put pressure on the options market and as you can see vols across the board have fallen from recent highs. They had moved lower into Asia but there appears to be little interest to buy options in any period at these lofty levels.

The 1 month 25 delta risk remains at -2.65%.

If we look at the one week volatility and add the risk reversals & 25 delta butterflies (skew) we can estimate the range within which we expect the spot to close in 7 days time with an 80% confidence level. The range today is 0.9675 – 1.0220 (545 pips which is 5 pips wider but nearly 70 pips higher than yesterday).

Expiries 0.9800, 0.9870, 0.9950

Option prices have lost a little bit of shine during the Asian time zone, and while the one week is sitting at 15.8% it had been at 15.9%. It captures Greek elections and G20 summit. Both Monday and Tuesday have high volatility priced in, 2 week is 14.25% and gets the FOMC. There are very few sellers of these contracts. Most flows are buyers of 1 and 2 week At the money options & put spreads, & there is some renewal of calendar spreads too.

The one month 25 delta risk reversal is a touch higher at -1.80% (ie. favouring EUR puts).

If we look at the one week volatility and add the risk reversals & 25 delta butterflies (skew) we can estimate the range within which we expect the spot to close in 7 days time with an 80% confidence level. The range today is 1.2160 - 1.2880 (720 pips which is wider than yesterday’s expected closing range but higher by around 70 pips).

Expiries 1.2455, 1.2500, 1.2550, & 1.2650

The whole curve pushed higher again in the London session but has subsided a little during Asian trading. One week has traded as high as 18.5% which tells you a lot about the nervousness in this cross.

The one month 25 delta risk reversal is now at -2.50% from -2.95% (favouring Yen calls/ EUR puts) which suggests the market will panic no matter which way the spot will go.

If we look at the one week volatility and add the risk reversals & 25 delta butterflies (skew) we can estimate the range within which we expect the spot to close in 7 days time with an 80% confidence level. The range today is 96.25 - 102.75 (still 650 pips but 20+ pips higher than yesterday’s range).

Expiries 99.50 & 100.00

USDJPY front-end is offered: o/n and surprisingly 1 week too. Spot has not done much in the past couple of days and players looking to trade next week events tend to focus on EURJPY.

The one month 25 delta risk reversal has turned to favour $US calls again by 0.15%.

If we look at the one week volatility and add the risk reversals & 25 delta butterflies (skew) we can estimate the range within which we expect the spot to close in 7 days time with an 80% confidence level. The range today is 78.15 – 81.20 (305 pips which is the exact same range as yesterday).

Expiries 79.55, & 80.25

Vols in Cable were up over night and have managed to retain most of their bids. It’s interesting that we have seen some demand for 6 month and one year options which has not been the case for some time.

The one month 25 delta risk reversal favours GBP puts by 1.40% which is higher by 0.05%.

If we look at the one week volatility and add the risk reversals & 25 delta butterflies (skew) we can estimate the range within which we expect the spot to close in 7 days time with an 80% confidence level. The range today is 1.5260 - 1.5850 (still 590 pips, 10 pips narrower but 70 pips higher than yesterday’s predicted range).

Expiries 1.5560, & 1.5600

EURGBP vols have climbed again, this time the three month vols has reached 9.00% and it has managed to remain at this level throughout the Asian day. Short dates are bid too, with 1 week at 10.70%.

Expiries 0.8030 & 0.8050