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OPTIONS: EUR Upside in Demand, While S/T Vols Rise to New YTD Highs

OPTIONS

Overall hedging volumes are lower-than-average for this time of day, as busier EUR, AUD/NZD and EUR/JPY options markets are countered by more muted JPY, CNY and AUD trade.

  • Upside exposure is in demand across EUR/USD space, mirroring the rally in spot today and possibly helping stabilise markets just above yesterday's 1.0666 multi-month low. $1.0750-75 strikes have drawn primary focus, with E2.75bln in call notional trading across those strikes alone, however decent demand for strikes as high as $1.0900 are also noted. This tilts the put/call ratio to 0.77 today. 
  • Meanwhile, the front-end of the EUR vol curve remains well supported - 2-week implied has now cleared 8 points for the first time this year as the contract captures both the first, and second round of the French legislative elections. 
  • AUD/NZD's solid rally off the mid-June lows is helping stimulate demand for options that cover further gains. Today's session has seen 1.0925, 1.1000 and 1.1200 calls trade in decent size, with one of the more notable trades overnight consistent with a 1.0850/1.1000 call spread that crossed in late Asia/early Europe. The trade captures the July 10th RBNZ decision, before expiring mid-month.
     

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