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OPTIONS: EUR Vol Markets Receive French Results Favourably

OPTIONS
  • The front-end of the EUR risk reversals curve has corrected higher in tandem with spot, and the recovery in favour of calls over puts will likely persist should the second round results this weekend confirm that both the right-wing RN and left-wing alliance fall short of a majority in the national assembly. 
  • One-week vols capturing the fallout of Sunday's second round have receded from elevated levels, suggesting the market's taking a more sanguine approach, with implied printing only a ~1 point premium over the YTD average today.
  • Despite the more favourable gyrations in options markets, the still notable premium for put vol over calls (~0.75 points) favours a lower likelihood of further downside, rather than a case for a firm rally. Spot has seen only a minor correction higher since the open, with the 50-dma acting as decent resistance at 1.0777. 
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