Options update for the Asian opening – what happened in the professional market.
The NY session was largely quiet, with most attention shifted toward the central bank meetings Thursday and US payroll data Friday. Most curves are inverted in the front end now, as daily variance for these two days has pushed up gamma contracts. They have also continued to flatten out through the belly of the curve.
| Yesterday | Today | Change | |
| 1w | 10.50% | 10.60% | 0.10% |
| 1m | 9.65% | 10.05% | 0.40% |
| 2m | 10.15% | 10.25% | 0.10% |
| 3m | 10.55% | 10.65% | 0.10% |
| 6m | 11.45% | 11.50% | 0.05% |
Vols finished firmer in NY particularly in the front end as the market awaits the various Central bank announcements this week as well the US payroll numbers. Flows continue to be light as we have seen curves flatten over the last week with the back end coming back off from last week's highs. 1m AUD traded above 10.0% early in the day where it would eventually settle with spot moving little.
The 1 month 25 delta risk reversal now sits at a 1.25% 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 1.0280 – 1.0685 (405 pips and a further 30+pips higher than we calculated on Friday for this Monday’s close)
Expiries: 1.0470 & 1.0510
| Yesterday | Today | Change | |
| 1w | 10.50% | 11.90% | 1.40% |
| 1m | 9.65% | 10.55% | 0.90% |
| 2m | 10.15% | 10.60% | 0.45% |
| 3m | 10.50% | 10.75% | 0.20% |
| 6m | 11.45% | 11.30% | -0.15% |
EURUSD vols opened up bid as spot eased back into a mid 1.22 handle to start the week. Thursday strikes in EUR USD are trading with a daily volatility over 18% for the expiry date. 1m-3m vols eased roughly 0.05% during NY trading, but closed half a vol higher than last week for the 1m and 0.2% for the 3m.
The one month 25 delta risk reversal is still trading at a 1% premium for 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 1.1990 – 1.2530 (540 pips and 40+ points lower than we calculated on yesterday)
Expiries: 1.2240 & 1.2260
| Yesterday | Today | Change | |
| 1w | 12.75% | 13.30% | 0.55% |
| 1m | 11.75% | 12.35% | 0.60% |
| 2m | 12.20% | 12.50% | 0.30% |
| 3m | 12.60% | 12.90% | 0.25% |
| 6m | 13.50% | 13.65% | 0.15% |
The pot was busy again last night and this has helped support the EUR JPY curve, particularly in the front end. This curve has flattened considerably over the past 24 hours.
The one month 25 delta risk reversal is now -1.20% (prem. for 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 93.40 – 98.10 (out to 470pips and over 70 pips lower than we called on yesterday).
Expiries: 95.60 & 96.00
| Yesterday | Today | Change | |
| 1w | 8.00% | 8.10% | 0.10% |
| 1m | 7.15% | 7.30% | 0.15% |
| 2m | 7.40% | 7.50% | 0.10% |
| 3m | 7.70% | 7.90% | 0.20% |
| 6m | 8.75% | 8.70% | -0.05% |
USD JPY vols were a touch higher today as spot sold off overnight. The 1m would finish about 0.3 vols higher than last week's close to 7.3%. The back end of the curve firmed up about a tenth of a vol across the 6m and 1y tenors. The front end was unchanged on the day despite the events due out this week. The market is hesitant is to get long USD JPY gamma as it has been the worst performer, not only among the JPY pairs, but in G10 as a whole.
The one month 25 delta risk reversal has moved out to favour USD calls by 0.35%.
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 77.00 – 79.40 (wider by 5 pips to 240 pips and 30 pips lower).
Expiries: 78.00, & 78.15
| Yesterday | Today | Change | |
| 1w | 8.55% | 8.55% | 0.00% |
| 1m | 7.75% | 7.85% | 0.10% |
| 2m | 7.90% | 7.95% | 0.05% |
| 3m | 8.20% | 8.20% | 0.00% |
| 6m | 8.80% | 8.80% | 0.00% |
BOE strikes were well bid last night in both GBP USD and EURGBP. Currently GBP USD has a higher risk premium priced into the front end as 1w historical vol was 7.5%, compared to 1w implied at 8.5%. In contrast, EUR GBP 1w trades under its historical volatility of 8.1%.
The one month 25 delta risk reversal is now -0.60% (favouring GBP 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 1.5445 – 1.5960 (still 505 pips wide but 25 points lower than we called yesterday)
Expiries: 1.5690 & 1.5730
| Yesterday | Today | Change | |
| 1w | 7.40% | 7.75% | 0.35% |
| 1m | 6.85% | 7.25% | 0.40% |
| 2m | 7.15% | 7.40% | 0.25% |
| 3m | 7.45% | 7.55% | 0.10% |
| 6m | 8.00% | 8.15% | 0.15% |
See our comments in Cable above
The 1 month 25d RR is trading very close to its 6 month lows and favours GBP calls EUR puts by 0.40%.
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 0.7690 – 0.7920 (still 230 pips and 20 pips lower than the range we calculated on Monday).
Expiries: 0.7780 & 0.7830
