ALERT: 900 Million Euro PUT, betting that the Euro will crash within 2 weeks, Rocks the FX Market

A EUR900 million trade rocked the London options markets this morning.
The two- week put on the euro against the U.S. dollar stood out as options trading in EUR/USD has been quiet this year due to the range-bound nature of spot, according to traders in London.

The put was struck at USD1.2800 when volatility was at 9.8%. One senior trader in London noted that recent concerns over the stability of Cyprus have now fuelled activity.

*Term Structure*
*EUR/USD*     *Fwd Rate*     *Fwd Pips*     *ATM Vol*     *25d RR*     *25d Bfly*
Spot:  1.2927/28
1W     1.29276/88     0.7/0.10     10.025     -0.95     0.15
1M     1.29298/311     3/3.2          8.975     -1.2        0.15
2M     1.29330/41      6.1/6.3        8.95       -1.35     0.2
3M     1.29359/70       9/9.2          8.95       -1.45     0.2
6M     1.29457/73     18.8/19.4     9.05       -1.6      0.25
9M     1.29570/88     30.1/30.9     9.239     -1.65     0.3
1Y     1.29679/724     41.1/44.6    9.35      -1.7       0.3
/Source: SuperDerivatives SGX/

Strategists at Credit Suisse noted that EUR/USD is likely to remain sensitive to Cyprus in the near-term. “We remain of the view that the likelihood of a systemic outcome is low, and as such maintain a medium-term bullish view on the euro.”

Martyn Harrison, fx options sales/trader at Marex Spectron in London told /DI/ EUR/USD one-year cross-currency basis swaps have rebounded from -28.9 basis points to -25 basis points following the large moves over the last couple of days.

“We see dips to 1.2806 technical support as a potential buying opportunity,” wrote fx strategists at BNP Paribas in a report. They noted that the currency pair still face significant headline risks, but
appear relatively cheap relative to the euro periphery-core bond yield spreads.

Two-week realized volatility on EUR/USD sat at 7.5% during London afternoon trading, while two-week implied was 9.3%. EUR/USD spot was USD1.2915 at press time.


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