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BUZZ-COMMENT-FX option flows - buying the right to buy EUR/sell USD

Credit: REUTERS/DADO RUVIC

Those using options to hedge EUR/USD are buying EUR call options - the right to buy EUR and sell USD at a set strike on a predetermined future date. Demand for these options was strong even when EUR/USD fell back from Friday's two-year high at 1.1908 to sub-1.1700 levels on Monday.

Aug 4 (Reuters) - Those using options to hedge EUR/USD are buying EUR call options - the right to buy EUR and sell USD at a set strike on a predetermined future date. Demand for these options was strong even when EUR/USD fell back from Friday's two-year high at 1.1908 to sub-1.1700 levels on Monday.

DTCC option data show the volume of EUR call options is the highest since the start of the coronavirus crisis, when EUR/USD rallied from 1.0800 to 1.1495, before retreating as the USD funding crisis hit. The bulk of the strikes (set levels at which to buy EUR/USD) range from 1.1800 to 1.2000 between now and Dec. 31, but many are as high as 1.2500.

Risk reversals are an option contract that shows how much volatility premium dealers are adding for strikes in one direction versus the other. Last week saw the benchmark one-month risk reversal trade its highest for EUR calls over puts in two years at 0.7, excluding the March panic peaks, and setbacks have been minimal.

For more click on FXBUZ

EUR/USD call/put volumeshttps://tmsnrt.rs/3guFK5y

1-3-12-month EUR/USD risk reversalshttps://tmsnrt.rs/2DfHEIU

(Richard Pace is a Reuters market analyst. The views expressed are his own)

((Richard.Pace@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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