The currency pair EURUSD has been moving without any particular trend for about two weeks. But obviously the Euro is aligning itself at the 200 dma (1.0375) and it looks like a break of that important average line may follow soon, right? In this regard, some players may prefer to take a look at the options market to avoid directional risk.
The Vol table (see below) shows the quotes at 05:15 NY time and reflects the risk of the coming weeks. The 2 week atm data point e.g. covers both, the central bank decisions of the FED and the ECB on December 14th and December 15th (see Central Bank Calendar). The high print in overnight options is likely due to this afternoon's USD GDP data.
(source: cme group, own representation)
From a trading perspective you may opt for the 2 weeks tenor. In this case, you pay a comparatively high premium, but active delta hedging could quickly pay off if the volatility is realized accordingly. As a protagonist with a real need for hedging (especially as a Dollar buyer), I would rather go for the longer maturities of 6 to 12 months. If the Euro dips again, these implied volatilities are likely to explode again (see Market update #11).
Players who want to participate from delta hedging and a possible increase in implied volatility can choose the 3 months tenor as usual. In the following I will show you a short sample break-even analysis for a 3mth 1.05 EURUSD straddle. The selected retail product does not perfectly match today's OTC expiries but the deviation is taken into account in the premium, in the forward and in the delta.
3mth EURUSD Call (hedged)
ISIN DE000DV512J6 (DZ Bank - not sponsored)
Expiry 10mar23
Strike 1.0500
Spot ref 1.0355
Fwd rate 1.0433
Prem 1.93 (EUR; 10.000 EUR Notional = 193 EUR prem)
Delta 0.48
Good luck,
Sebbo