FX options wrap - volatility hit; Bears beware; Special flows
The paring of recent banking crisis risk premiums and impending Easter holidays have pressured shorter dated and front end expiry implied volatility to longer term lows this week.
The USD is broadly weaker but bears should beware versus EUR where option trade flows suggest that further losses will be a grind, especially above 1.1000. It's a similar situation in GBP/USD where there's been little interest to buy protection above 1.2500 so far. AUD/USD option flows suggest traders are happy to keep selling strikes both sides of spot which is typically indicative of risk appetite and low volatility within a familiar range.
Talk of special flows amid month and fiscal year-end activity that saw increased USD/JPY volatility and made shorter dated options attractive after their implied volatility setbacks. USD/JPY option dealers said the firmer spot levels enticed demand for downside strikes at cheaper levels, which would fit with talk of FX spot sellers looking for a near term top. April's BoJ meeting remains a strong volatility and downside risk to USD/JPY according to 1-month expiry options.
For more click on FXBUZ
Benchmark 1-month expiry FXO implied volatility in G10 FX majorshttps://tmsnrt.rs/3lPHqPf
(Richard Pace is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
