Last week when the ECB made its rate and monetary announcements, ?FX option vols got completely crushed. ?Killed so badly that they touched low levels that we have potentially never seen. ?Now that vols made that kind of move, ?it is possible that we may have found the absolute floor in FX option vols. ?Take a look at a chart of FXE.
Livevol (r)?www.livevol.com
Since touching crazy low levels vols have somewhat flat lined and even begun to creep higher, combine that with what ammounts to SOME movement and it appears that 4% and change is the lower bound for currency option vols. ?Thus, I think there is a strong chance we could see currency option prices slowly climb, or at a minimum not decrease going forward.
The Trade:
if one is playing directionally, ?buy options. ?If one is playing NON-directionally…buy options.
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