BUZZ-COMMENT-Options flag extent of U.S. NFP risk to Forex market

Feb 6 (Reuters) - Overnight options now expire at 10:00 a.m. New York/15.00 GMT on Friday, and therefore include January'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 increase in implied volatility when its related expiry date includes a potentially market-moving event will therefore show how much additional FX realised volatility that event is expected to generate.

Since including the U.S. jobs data, overnight expiry EUR/USD implied volatility has increased from 13.0 to 15.0. The premium/break-even for a simple vanilla straddle is up from 56 USD pips to 65 USD pips in either direction.

Overnight USD/JPY implied volatility has increased from 14.0 to 17.5 - a premium/break-even of 89 JPY pips to 111 JPY pips in either direction.

GBP/USD overnight options failed to add any premium for Thursday's Bank of England policy decision, but their implied volatility has increased from 14.0 to 17.0 for the U.S. jobs data, which is a premium/break-even of 73 USD pips to 88 USD pips in either direction.

AUD/USD overnight expiry implied volatility is up from 9.5 to 12.5, or 25 USD pips to 33 USD pips in either direction.

For context, these implied volatility increases and higher levels (with the exception of USD/JPY) are less than those posted before the January 10 release of December's U.S. jobs data, suggesting the FX market isn't expecting a significant FX reaction.

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