FX options wrap - USD puts, NFP risk, JPY 140, huge euro
Sept 3 (Reuters) -Broader FX option implied volatility setbacks remain limited ahead of Friday's U.S. jobs data and the strong risk premium for Friday expiries shows a market prepared for FX realised volatility to increase.
Shorter dated expiry USD puts have been more sought and demand more premium than USD calls against many currencies. That reflects not only the recent USD setback from its new recent highs, but a greater perceived risk of increased FX volatility in the event of an NFP miss that puts more pressure on U.S. rates.
USD/JPY option flows are still dominated by downside strikes, with 140.00 strikes on a 1-3-month horizon proving popular. Benchmark 1-month expiry is up 0.4 this week to trade 12.3.
EUR/USD is tied to massive strike expiries which are likely to dominate this week as many traders are sidelined going into Friday's jobs data. Tuesday saw the pair cling to 2-billion euros of 1.1040-50 expiries. Implied volatility is heavy as a result and the benchmark 1-month expiry traded a huge 1-billion euros at 6.275 and the 1-year on lesser amounts at 6.3.
GBP/USD implied volatility also edges marginally lower, with 1-month 7.05 from 7.15 this week. Risk reversals favour downside strikes but there's no panic to protect against rapid GBP declines.
AUD/USD 1-month implied volatility trades a new 3-week high at 9.8 amid the spot setback from 0.6800.
For more click on FXBUZ
1w implied vol https://tmsnrt.rs/3X9kLMg
1-week and 1-month expiry USD/JPY FXO implied volatility https://tmsnrt.rs/4eqLScX
EUR/USD FXO implied volatility https://tmsnrt.rs/4e4moBN
(Richard Pace is a Reuters market analyst. The views expressed are his own)
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