FX Update- EUR/USD Options
EUR/USD option volatility soared amid the spot slide, with the front end of the implied volatility curve trading up to 10.4/10.6% after spot traded within a few pips of 1.5000. The 1-mth contract started the European session at 9.3/9.6%, but the pace of the spot decline fueled massive interest for ATM volatility. This theme is reflected across the whole curve, with prices steepening. 3-mth ATM indicates 10.6/10.8%, 6-mth trades at 10.65/10.85% and the 1-yr is at 10.85/11.05%. The move higher in volatility has also been accompanied by firmer risk reversals as the premium for EUR puts firms up on EUR put demand. 1-mth 25-d EUR puts are now indicating 0.5/0.7% over ATM straddles, with a similar premium in 6-mth and 1-yr reversals. A break of the psychological 1.5000 level and key support at 1.4950-55 would encourage further demand.