Jan 6 (Reuters) - FX implied volatility gauges FX actual/realised volatility, which is a key part of an FX option premium, and it has seen a significant increase since including Friday's U.S. NFP jobs data.
Those using options to trade FX volatility are looking to capitalise on any disparity between actual and implied volatility over the life of the option. Unsurprisingly, one-week expiry implied volatility was marked higher last Friday to account for the uncertainty and additional FX realised volatility expected over the coming U.S. jobs data.
One-week expiry implied volatility gains in the main USD pairs such as EUR/USD, GBP/USD and AUD/USD were around 1.5 when including Friday's U.S. jobs data. That is similar to those gains seen when first including the Dec. 6 U.S. Jobs data release.
However, one-week expiry USD/JPY implied volatility gains fell far below those seen before the Dec. 6 jobs data and were quick to pare the latest increase. This price action reflects the recent lack of actual/realised USD/JPY volatility and suggests the realised FX volatility risk premium already in the price of USD/JPY options is deemed sufficient.
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1 week expiry FXO implied volatility https://tmsnrt.rs/4h0pNTv
(Richard Pace is a Reuters market analyst. The views expressed are his own, editing by Ed Osmond)
((Richard.Pace@thomsonreuters.com))
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