Aug 24 (Reuters) – By their forward-looking nature, FX options pricing, flows, and positioning can offer an insight into expectations for EUR/USD. Lately, investors have been buying options that would benefit from more EUR/USD gains over coming months, looking for an eventual break of huge barriers at 1.2000.
Risk reversals show this strong lean. Dealers hiked prices for EUR calls over puts – the right to buy EUR/USD versus sell it on a future date.
Ignoring the early March panic pricing, the EUR call over put premium reached multi-year highs in August, and while it remains intact, shows dealers haven’t changed their view of further EUR/USD gains.
However, one-month expiry risk reversals have dropped back to 0.4 from 0.85 premium for EUR calls over puts, so the near-term risk of more EUR/USD gains is perceived to be faltering for now. Setbacks in three- to 12-month contracts are more limited, and at 0.6 vols, above where they were pre-crisis, leaving the medium/longer term view of more EUR/USD gains intact.
For more click on FXBUZ
1-3-12-month EUR/USD risk reversalshttps://tmsnrt.rs/31kMEFx
(Richard Pace is a Reuters market analyst. The views expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.