Options update for the Asian opening – what happened in the professional market.
We saw a little more activity in the options market overnight but prices on the whole are still struggling to find support. EUR JPY has suffered most, but EUR USD has begun to find buyers, particularly at the front end as implied vols are still lower than realised vols.
| Yesterday | Today | Change | |
| 1w | 8.50% | 8.35% | -0.15% |
| 1m | 9.50% | 9.35% | -0.15% |
| 2m | 10.00% | 9.75% | -0.25% |
| 3m | 10.40% | 10.35% | -0.05% |
| 6m | 11.45% | 11.40% | -0.05% |
The appetite for risk assets has continued to support the $A and take away the desire for protection. The front end continues to be sold off but the three and six month periods are higher than where we left them in Europe.
The 1 month 25 delta risk reversal has followed vols and moved further in to 1.45% premium for $A 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 1.0120 – 1.0430 (still 310 pips but 50 pips higher than yesterday’s calculated range).
Expiries: 1.0250, & 1.0260
| Yesterday | Today | Change | |
| 1w | 8.80% | 9.00% | 0.20% |
| 1m | 9.70% | 9.60% | -0.10% |
| 2m | 10.00% | 9.80% | -0.20% |
| 3m | 10.30% | 10.20% | -0.10% |
| 6m | 11.05% | 10.95% | -0.10% |
The EUR USD spot had a pretty active night and that has added some support to the options prices. We continue to expect some support in the front end as implied vols remain at or above the realised measure.
The one month 25 delta risk reversal has moved out a touch to -0.90% (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 1.2075 – 1.2495 (out to 420 pips from 405 pips & 15-20 pips higher than yesterday’s calculated range).
Expiries: 1.2300 & 1.2320
| Yesterday | Today | Change | |
| 1w | 11.65% | 10.60% | -1.05% |
| 1m | 12.45% | 11.80% | -0.65% |
| 2m | 12.70% | 12.10% | -0.60% |
| 3m | 13.05% | 12.70% | -0.35% |
| 6m | 13.85% | 13.50% | -0.35% |
The back end of this curve has been hit hardest on a weighted basis. Realised vol is still above 12% for the pats month so the front end of the curve should find some support at these levels.
The 25 delta risk reversal remains at -1.60%.
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 95.25 – 99.10 (385 pips which is 35 pips tighter than yesterday &40+ pips higher).
Expiries: 97.00 & 97.25
| Yesterday | Today | Change | |
| 1w | 6.65% | 6.30% | -0.35% |
| 1m | 7.45% | 7.10% | -0.35% |
| 2m | 7.70% | 7.40% | -0.30% |
| 3m | 8.00% | 7.75% | -0.25% |
| 6m | 8.95% | 8.70% | -0.25% |
Despite the activity in most other crosses, the USD JPY spot hardly moved lat night, needless to say that doesn’t help option prices. The long dates are now at lows not seen for several years.
The USD JPY 25 delta risk reversal remains in favour of USD calls 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 78.15 – 80.10 (in to 195 point now and 20 pips higher than yesterday’s calculation for next Tuesday).
Expiries: 78.95 & 79.00
| Yesterday | Today | Change | |
| 1w | 6.35% | 7.05% | 0.70% |
| 1m | 6.90% | 7.10% | 0.20% |
| 2m | 7.30% | 7.30% | 0.00% |
| 3m | 7.75% | 7.80% | 0.05% |
| 6m | 8.70% | 8.80% | 0.10% |
We did see plenty of activity in both the spot and options market for cable. As we have pointed out a couple of times there is good value in the front end if you want a directional play and all traders who bought the one month 1.5600 calls will be smiling today.
The 25 delta risk reversal is now sitting at a 0.70% premium for Cable 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 1.5435 – 1.5850 (out to 415 pips from 370 and 40+ point higher on the topside of yesterday’s range).
Expiries: 1.5600, 1.5625 & 1.5660
| Yesterday | Today | Change | |
| 1w | 5.95% | 5.85% | -0.10% |
| 1m | 6.60% | 6.45% | -0.15% |
| 2m | 6.95% | 6.75% | -0.20% |
| 3m | 7.25% | 7.20% | -0.05% |
| 6m | 8.10% | 8.00% | -0.10% |
It seems the market believes fair value for this pair is still some ways lower than current levels. Vols were sold off yesterday in Asia and they continued that trend in Europe and Nth Am.
The one month 25 delta risk reversal shows a premium for EUR puts of 0.50%.
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 0.7765 – 0.7935 (170 pips and almost the identical range to yesterday).
Expiries: 0.7865
