Last night we noted that OandA will shut-down trading on Sunday ahead of the market-moving events surrounding the Greek election (as it seems they are unwilling to take the agency risk and potentially counterparty risk on a large gap). Nowhere is this more clearly priced into the market than the short-dated FX option market. EURUSD 1 week implied vol is at its greatest premium to realized vol ahead of this weekend than at any time in the last three-and-a-half years. The last time the level of short-dated vol was near this high (in absolute and relative terms) was December 9th 2011 and EURUSD fell 400 pips in the next few days.
Upper pane is 1 week EURUSD implied vol (black) vs realized vol (orange); middle pane is the spread between the two; lower pane is EURUSD spot. Blue dashed vertical line is the last time we were close to these absolute and relative levels of vol premium...
At 16.5% implied for 1 week vol - this is the highest since before the last Grand Plan in early November and was followed shortly thereafter by global synchronized central bank intervention.
In the meantime, EURUSD has dropped to more than 2 sigma cheap to its swap-spread-implied fair-value (though as we have seen in the late summer and fall of last year this can remain for longer periods) as the 'chaos' premium hits the Euro.