BUZZ-COMMENT-Options flag extent of U.S. NFP risk to Forex market
Jan 9 (Reuters) - Overnight options now expire at 10:00 a.m. New York/15.00 GMT on Friday, and therefore include December's U.S. jobs data, with the increase in related premiums showing the expected FX market reaction.
FX volatility is a key yet unknown parameter of an FX option premium, so dealers use implied volatility - their best estimate. Any change in implied volatility when its related expiry date includes a potentially market-moving event will therefore show how much additional FX volatility that event is expected to generate.
Overnight EUR/USD implied volatility is up from 11.5 to 16.75 since Wednesday - a premium/break-even for a simple vanilla straddle of 49 USD pips to 72 USD pips in either direction.
Overnight USD/JPY implied volatility is up from 12.5 to 17.0 - a premium/break-even of 82 JPY pips to 113 JPY pips in either direction.
Overnight expiry AUD/USD implied volatility increased from 10.0 to 14.0 - a premium/break-even of 26 USD pips to 36 USD pips in either direction.
The biggest gainer was GBP/USD, aided by the hefty surge in broader GBP related implied volatility toward 2-year highs as GBP takes a broad based hit. Overnight GBP/USD also includes a key speech by Bank of England Deputy Governor Sarah Breeden. Overnight GBP/USD implied volatility has doubled to 20.0 since Tuesday, as has its premium/break-even to 102 USD pips in either direction.
For more click on FXBUZ
(Richard Pace is a Reuters market analyst. The views expressed are his own)
((Richard.Pace@thomsonreuters.com))
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