US Markets

BUZZ-COMMENT-Ominous signals from the USD/TRY options market

Credit: REUTERS/DADO RUVIC

Price action in option markets can offer clues about expectations for USD/TRY, and it's starting to signal another bout of TRY weakness could soon be forthcoming.

Aug 25 (Reuters) - Price action in option markets can offer clues about expectations for USD/TRY, and it's starting to signal another bout of TRY weakness could soon be forthcoming.

From late July, USD/TRY options posted big gains in implied volatility and premium for TRY puts over calls (topside), foretelling the eventual break of May's 7.2690 record high on August 6.

Having peaked around Aug. 10, implied volatility and TRY put premiums have eased (albeit still well above pre-spike lows), to reflect the lack of actual spot volatility since, but those setbacks have stalled, with renewed demand noted this week.

Benchmark one-month implied volatility rallied from 10.0 to 27.0 between late July and Aug. 10, before easing back to 19.0, where it's now finding a base.

TRY put over call options on one-month risk reversals rallied from 4.5 to 10.5 implied vols between late July and early August, with setbacks stalling around 8.0 vols since.

Dealers also report a pick-up in higher strike option demand, that would benefit from another spot upleg and implied volatility gains.

For more click on FXBUZ

USDTRY 1-month 25d risk reversalshttps://tmsnrt.rs/3jaKuyk

1-week and 1-month USD/TRY implied volatilityhttps://tmsnrt.rs/34seGkp

(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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