Aug 6 (Reuters) - USD/TRY options and technical analysis warned it was coming , and now USD/TRY has broken May's 7.2690 record high, reaching 7.2900, with option premiums spiking even higher to warn of more potential volatility and lira losses.
One-week USD/TRY implied volatility was 21.0 in early London from 7.0 in late July but has jumped through 25.0 since. Bid/offer spreads are wide, reflecting the heightened risk and lack of liquidity now dogging market makers.
With an offer above 30.0 implied volatility - the break-even for a simple one-week vanilla straddle is now 25.0 big figures in either direction, while one-month trades above 23.0 from 19.0 today - a break-even of 40 big figures either side. USD/TRY has moved 40 big figures in 48 hours - so these implied volatility levels are not unjustified.
Those wanting leveraged bets for further USD/TRY gains may consider TRY puts with strikes well above the current spot to reduce premiums. They would increase in value if spot and implied volatility continue to gain.
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USDTRY 1-week and 1-month implied volatilityhttps://tmsnrt.rs/2EP33cm
(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.