EUR/USD: Options market turns bearish on EUR

EUR/USD puts are drawing bids amid the slide in the common currency.
Put options (bearish bets) are claiming the highest premium in nearly four months.

Omkar Godbole FXStreet Contributor

EUR/USD's options market recently turned bearish on the common currency. Notable, the premium claimed by the put options (bearish bets) is now the highest in nearly four months.

One-month risk reversals (EUR1MRR), a gauge of calls to puts, crossed below zero on Feb. 10 and fell to -0.425 on Friday, the lowest level since Oct. 29, 2019.

A reading above zero indicates the premium claimed by calls (bullish bets) is higher than that for puts while a below-zero figure is the result of a higher volatility premium on puts.

Therefore, the recent drop below zero represents a bearish shift in the market sentiment and Friday's drop to -0.425 indicates the demand for or the premium claimed by put options has hit the highest since the end of October.

Put simply, investors are positioned for a deeper drop in the common currency. EUR/USD topped out near 1.1095 at the end of December and fell to multi-year lows near 1.0830 on Friday. At press time, the pair is trading at 1.038 with the short duration technical studies signaling oversold conditions.

EUR1MRR

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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