Option Volatilities
The US dollar has moved up steadily over the past week. Last week the dollar drifted higher and volatilities seemed to just drift lower in sympathy even though volatilities are already at the extreme lows for the year. The dollar has given back some of those gains as we begin to new week and some questions linger about the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />United States economy. There is a great deal of data due out this week that could shift the tone of the markets. This includes the ISM Index, ISM services, Factory orders, Initial Claims and Non farm payroll numbers for September. They all will be closely scrutinized for indications on how the US economy is faring. Over in Europe, we have the ECB meeting where they are predicted to lift interest rates by another quarter point. Trichets comments will be key. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Option volatilities are lower once again this week across the board. Risk reversals still favor upside strikes, particularly in EUR. The one month 25 delta risk reversals continue to favor EUR calls as they trade at a vol premium of 0.0%/0.20% over EUR puts. USD puts are also favored versus the JPY with a vol premium of 0.5%/0.80% for USD puts over USD calls with regards to USD/JPY.
Option Trading Strategies
Below please find some strategies, which depending on your view might be applicable. Please bear in mind that all of these trades can be applied to any of the currency pairs, which may be traded. All barrier levels, strikes, triggers, payouts, and maturity dates can be tailored to each individuals views.
