VERBATIM
A EUR900 million trade rocked the London options markets this morning.
The two- week put on the euro against the U.S. dollar stood out as options trading in EUR/USD has been quiet this year due to the range-bound nature of spot, according to traders in London.
The put was struck at USD1.2800 when volatility was at 9.8%. One senior trader in London noted that recent concerns over the stability of Cyprus have now fuelled activity.
*Term Structure*
*EUR/USD* *Fwd Rate* *Fwd Pips* *ATM Vol* *25d RR* *25d Bfly*
Spot: 1.2927/28
1W 1.29276/88 0.7/0.10 10.025 -0.95 0.15
1M 1.29298/311 3/3.2 8.975 -1.2 0.15
2M 1.29330/41 6.1/6.3 8.95 -1.35 0.2
3M 1.29359/70 9/9.2 8.95 -1.45 0.2
6M 1.29457/73 18.8/19.4 9.05 -1.6 0.25
9M 1.29570/88 30.1/30.9 9.239 -1.65 0.3
1Y 1.29679/724 41.1/44.6 9.35 -1.7 0.3
/Source: SuperDerivatives SGX/
Strategists at Credit Suisse noted that EUR/USD is likely to remain sensitive to Cyprus in the near-term. “We remain of the view that the likelihood of a systemic outcome is low, and as such maintain a medium-term bullish view on the euro.”
Martyn Harrison, fx options sales/trader at Marex Spectron in London told /DI/ EUR/USD one-year cross-currency basis swaps have rebounded from -28.9 basis points to -25 basis points following the large moves over the last couple of days.
“We see dips to 1.2806 technical support as a potential buying opportunity,” wrote fx strategists at BNP Paribas in a report. They noted that the currency pair still face significant headline risks, but
appear relatively cheap relative to the euro periphery-core bond yield spreads.
Two-week realized volatility on EUR/USD sat at 7.5% during London afternoon trading, while two-week implied was 9.3%. EUR/USD spot was USD1.2915 at press time.
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