We often write about FX options expiries here but trading in FX options is booming and lots of traders want to know more.

My friend Sascha at FXDD’s options desk writes about FX options and notes that USD/JPY traders are long vol into today’s FOMC minutes, especially low delta options. He also expects to see more selling in long-dated options with the market stuck in low-volatility mode.

Here’s what he sent me:

Summary

It’s been tough to build any short vol positions for the summer at these levels. Realized have rebounded recently, but most decent trade ideas are found in the very back-end of the curves.The steepness in the front-end should be ignored as it’s mainly just a function of the supply/demand schedule. There is no point selling mid dates though calendar spreads. Low delta, long dated, low theta directional positions seem to be keeping trading lines active.

EUR Zone- Realized and implied in EURUSD are poor. 1w 4.20 1m 4.50, 1y 6.00. FOMC tonight is key for direction and a break below 1.3575 could see downside momentum pick up.

Decent demand was seen overnight at 1.3600-90 following weak German export data which helped push the single currency towards the post-NFP highs at 1.3620. EUR puts are thus in demand, particularly in EURGBP. GBP curves have a slight bid tone compared to other pairs in the EUR block with mid-dated BoE dates being the focus of the 1st rate increase.

JPY: Vols offered but the FOMC minutes are keeping vols propped up. USDJPY continued to trade well-offered overnight along with poor performance in stocks and lower yields (Nikkei declined 0.4% while S&P futures were flat. The 10y US yield edged up slightly to 2.57%) 101.85 is the resistance followed by 102.00. Support at 101.35.

O/n relatively bid into the FOMC mins later today. Topside low delta options are bid while the downside equivalent has calmed down with spot higher during London. Back-end vols continue to be going one way: given. Curves remains steep, and more softening in the back dates is expected.

If you want to know more about FX options or what’s happening in the market now contact Sascha at sszyfman@fxdd.com