FX Options Insights 20/11/24

  • EURUSD: Significant cash-related hedging flows are being drawn to the impending expiration of major FX option strikes, which may help to contain volatility and keep the EUR/USD spot price in check. Nearby EUR/USD strikes totalling billions of euros are set to expire this week, and their value is increasing. With another 1.8 billion euros between 1.0500-30 and over 3 billion euros between 1.0585-1.0625, the EUR/USD has reverted to 2.4 billion euros of 1.0540-50 strikes that expire on Wednesday. 1.0600-10 on 2.6 billion euros and 1.0535-50 on 2.1 billion euros are Thursday's noteworthy strikes. At 1.0500 on 1.7 billion euros, between 1.0530 and 50 on 1.6 billion euros, and at 1.0600 on 2.1 billion euros, the biggest strikes are scheduled to expire on Friday. On November 27, there will also be significant strikes in the same range, with 3 billion euros at 1.0500 and 4.5 billion euros between 1.0600 and 1.010. The EUR/USD is reportedly being restrained in the near term by a large number of orders and positions in the 1.0450–1.0650 area in both the spot and options markets. The impending Eurozone PMI data on Friday poses the biggest danger to EUR/USD, but if it does not move the market, the current ranges may hold through next week.

  • USDCNH: The implied volatility of USD/CNH FX options has recently been under a lot of pressure. Following a complete retracement of the pre-U.S. election advances to long-term highs of 9.3 and 7.4, respectively, the benchmark 1-month implied volatility is currently 4.65 and the 3-month is 5.7. The 1-year implied volatility is in the mid-6s, but longer-dated implied volatility is maintaining stronger levels. For the time being, the price movement is consistent with reduced realised volatility and a familiar spot market, and the recent urge to hedge cash longs with downside options has also decreased. The unwillingness to sell longer-dated options, however, indicates that FX risks are still anticipated to persist beyond 2025.