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OPTIONS: EUR Vols Marked to Second Highest Level of '24 Pre-ECB, US CPI

OPTIONS
BulletMarketsForeign Exchange Bullets

EUR vols being marked notably higher today, as the overnight contracts now capture the fallout of both the US CPI print later today as well as the ECB rate decision tomorrow. Overnight implied has touched 18.5 points for the second highest reading of 2024 (after the US Presidential election results), which blows out the break-even on an ATM straddle to around 80 pips, over double the YTD average.

  • The options-implied range brings the $1.0600 handle into focus - a level that's drawn considerable expiry interest on the lead-up into the end of the year, as mentioned above: a cumulative E10.8bln is set to roll off at that strike across the coming week, dominated by a E6.3bln strike expiring on Monday - made up of E3.4bln in calls, and E2.9bln put notional. Likely composed of sizeable year-end vol hedges, and those looking to capture any volatility following the final ECB decision of 2024.
  • Trade activity so far Wednesday has favoured downside EUR exposure, with a EUR/USD put/call ratio of ~1.4. $1.0420 and 1.0380 strikes have drawn considerable demand, although puts have seen noteworthy trade with strikes as low as 1.0200-25.
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EUR vols being marked notably higher today, as the overnight contracts now capture the fallout of both the US CPI print later today as well as the ECB rate decision tomorrow. Overnight implied has touched 18.5 points for the second highest reading of 2024 (after the US Presidential election results), which blows out the break-even on an ATM straddle to around 80 pips, over double the YTD average.

  • The options-implied range brings the $1.0600 handle into focus - a level that's drawn considerable expiry interest on the lead-up into the end of the year, as mentioned above: a cumulative E10.8bln is set to roll off at that strike across the coming week, dominated by a E6.3bln strike expiring on Monday - made up of E3.4bln in calls, and E2.9bln put notional. Likely composed of sizeable year-end vol hedges, and those looking to capture any volatility following the final ECB decision of 2024.
  • Trade activity so far Wednesday has favoured downside EUR exposure, with a EUR/USD put/call ratio of ~1.4. $1.0420 and 1.0380 strikes have drawn considerable demand, although puts have seen noteworthy trade with strikes as low as 1.0200-25.