The last day of the last full trading week of the year typically attracts the largest collection of strike expiries and 2024 is no different.
EUR/USD is currently shackled by 36 billion euros between 1.0325 and 1.0450 and would probably need a significant beat from the impending U.S. PCE data to threaten the large FX option barriers and triggers from 1.0300. GBP/USD is tied by 3 billion pounds around 1.2500, EUR/GBP by 5 billion euros around 0.8300 and USD/JPY by $4 billion at 157.00.
A more hawkish U.S. Federal Reserve and the risk of market volatility surrounding Donald Trump's policies when he returns to the U.S. presidency in January are set to maintain uncertainty into 2025. That's supporting broader implied volatility, especially longer dated expiries in currency pairs such as EUR/USD, where long Vega has proved to be a very profitable strategy since the U.S. election.
USD/JPY gains were knocked by Japanese verbal intervention on Friday, but official intervention is unlikely to be realised below 160.00, which makes JPY put/USD call spreads and JPY puts with reverse-knock-out (RKO) triggers, potentially attractive strategies.
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(Richard Pace is a Reuters market analyst. The views expressed are his own)
((Richard.Pace@Thomsonreuters.com))
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