FX Options Insights
https://www.tickmill.com/blog/institutional-insights-bnpp-fx-vol-options-volumes-are-a-leading-indicator
Implied volatility for FX options remains elevated, hovering near both recent and historical peaks, signaling a strong warning against complacency regarding potential FX volatility spikes. The immediate focus is on the upcoming U.S. CPI data release on Wednesday, as reflected in the notable rise in overnight implied volatility now that this key event is priced in.
For EUR/USD, the pair is nearing a critical double top at 1.0937 (November 5-6). A move above 1.0900 could push 1-month implied volatility to 9.0 and 1-year implied volatility to 7.65. There is substantial interest in EUR call options, particularly for higher strikes within call spreads and knock-out structures, indicating a potential target of 1.1500 in the coming months.
GBP/USD continues to struggle with breaking past the 1.3000 threshold. Implied volatility has eased slightly, with the current reading at 8.1, down from 8.6.
AUD/USD implied volatility remains stable, with the 1-month rate holding in the low teens due to ongoing risk aversion and subdued trading activity.
In the case of USD/JPY, implied volatility and call-over-put premiums are just below recent and projected 2025 highs. This comes as some profit-taking occurs on downside structures, while the spot price edges higher following a GPIF report. However, with equity markets still under pressure and overall risk sentiment cautious ahead of Wednesday’s U.S. CPI data, USD/JPY implied volatility remains significantly elevated compared to other major currency pairs.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!