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2025-07-31 18:13:11
[A sign of a EUR/USD plunge? Huge put option volatility reveals market panic] ⑴ On July 31st, the market saw a large amount of buying of EUR/USD put options. ⑵ This indicates that put options are relatively cheap at the moment, effectively hedging against the risk of further declines against the EUR/USD. ⑶ Specific data shows that one EUR/USD put/call option with a strike price of 1.1180, expiring on October 3rd, has a size of €650 million and an implied volatility of 7.4. ⑷ The premium on this option is approximately 37 basis points, implying a break-even point of 1.1143. ⑸ As the spot price falls, many EUR/USD top call options have locked in profits and been closed. ⑹ However, overall demand for bottom put options remains relatively subdued. ⑺ One-month risk reversals (a measure of the demand bias for call/put options) show that USD call options are offering a premium of only 0.1 volatility points. 8. If the EUR/USD pair falls below the support level of 1.1405 on the daily cloud chart, it could become a catalyst for further significant declines and stimulate more demand for options. 9. Friday's upcoming US employment data could be a key catalyst for significant market volatility and a surge in demand for options.
