BUZZ-COMMENT-GBP/USD options signal volatility risk over BoE, U.S. jobs


Aug 5 (Reuters) - GBP/USD's volatile start to August is set to continue, with a Bank of England Monetary policy announcement, minutes, and monetary policy report due Thursday and U.S. jobs data in the mix on Thursday and Friday.

FX option markets have raised implied volatility levels over recent sessions, which reflects the increased risk of actual volatility, on which this derivative thrives.

Holders of implied volatility will continually neutralise the options strike risk by buying below/selling above the strike (known as delta hedging). The aim is to capture more spot pips than the premium paid for the option - they want actual volatility to out-perform implied, regardless of direction.

Overnight options now expire Thursday 10 a.m. New York/3 p.m. London, and capture the BoE and U.S initial jobless claims data. Overnight implied volatility briefly traded 15.0, its high since June. It's premium/break-even around 82 pips in either direction for a simple vanilla straddle.

One-week expiry implied volatility trades 10.0 and one-month 9.0, also highs since June.

For more click on FXBUZ

GBP/USD Overnight, 1-week and 1-month implied volatility

(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.


More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.