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Wednesday, December 13, 2006

FX OPTIONS: EUR/USD Vols Extend Losses, Large Topside Barrier

EUR/USD vols extend losses, with the 1-mth getting given at 7.2% to show 7.05/7.25. Vols have traded on the heavier side after a largely muted reaction to yesterday's FOMC minutes. Exotic option supply has added to the heavier vol tone, with reports of a large 1.3290 barrier expiring tomorrow.

The payout is reportedly EUR 15 million and fueling gamma activity and delta re-hedging. Option defensive sellers are noted in spot from the 1.3270/75, while stops are seen around 1.3305/10. Further expiries are seen at 1.3250 and 1.3200 today.

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