EURUSD options were heavy with spot glued around 1.0750 yesterday. Vols were muted in Asia, ticked lower into Europe with a few sellers across the curve but have since turned. One month is 11.80 from 10.6 and 1m risk reversals 1.32 for euro puts from 1.1 early in Europe and 1.25 in Asia.
USDJPY actual volatility is dying down and taking implieds along. Vols have rebounded following spot today; 1m is 8.23 from as low as 7.9 yesterday. One month actual volatility is on a 6-handle. The differential had consistently been 1-2 vols with leveraged names buying yen puts but that reversed yesterday as no one could afford paying decay for so long without spot moving. We expect more outright selling or rolling of options further down the curve in the next week or so. Buying RKOs or 1 by 2 vanilla spreads is a good strategy for that view.
EURCHF vols are trying to base after the pummeling yesterday; 1m is 8.15 from yesterday’s low of 7.95. The downside to being long options is very limited here with spot through 1.04 and EURUSD options bid again. This just shows how transactional the EURCHF options market remains. (UBS)