Players buying up in large sizes euro/U.S. dollar puts set to expire Thursday stood out in a quiet week in Europe. Investors across the board were buying puts with strikes at USD1.20 during the early part of the week when spot was hovering around USD1.19. As DW went to press Thursday spot was at USD1.1983.
"Most of the market is on this play," said one trader, who estimated several yards had been traded. "The strike was trading in very decent sizes this week," agreed another.
Hans Redeker, global head of fx strategy at BNP Paribas in London, said the prolonged economic boom in the U.S. means euro/dollar volatility has declined and there were no drastic movements in the cross during the week. One-week euro/dollar implied volatility ground tighter to 8.382% on Tuesday from 9.371% the week before. Redeker also noted the single currency had weakened considerably against the greenback in the past three weeks, driving in to USD1.1935 on from USD1.2319
One London trader also noted a number of investors, mainly funds, were buying call options on Latin American currencies against the dollar. He said they were snapping up Brazilian real and Mexican peso calls out to 12 months to gain low-delta exposure to the currencies. USD/BRL options were popular with strikes around BRL2.00--spot was at USD2.20 last Thursday--and USD/MXN call options were sold with MXN10.00 strikes, with spot at MXN10.60.
