FX Markets Bracing For Major Event

Tyler Durden's picture


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.

Charts: Bloomberg

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Thu, 06/14/2012 - 09:40 | 2525281 GoldbugVariation
GoldbugVariation's picture

I know this is not a PM thread but for an example of volatility, look at Silver, dropped $0.70 in 3 minutes at US opening today, I've never seen such a straight line drop.

Thu, 06/14/2012 - 09:49 | 2525302 SilverTree
SilverTree's picture

Clinging to the Superego while dying.



The Sunday Night Paper Silver Massacre – Revisited


Thu, 06/14/2012 - 10:03 | 2525399 fuu
fuu's picture

There it is. That was brutal. $0.60 is just a love tap.

Thu, 06/14/2012 - 11:36 | 2525854 SilverRhino
SilverRhino's picture

That was one really fucked up week for PMs

Thu, 06/14/2012 - 09:44 | 2525303 LULZBank
LULZBank's picture

You need to get out more.

Thu, 06/14/2012 - 09:46 | 2525315 semperfi
semperfi's picture

I'm looking forward to $100/day gold swings and $5/day silver swings!  Bring it on!

Thu, 06/14/2012 - 10:07 | 2525413 Seize Mars
Seize Mars's picture


Every thread is a PM thread. Ha ha!

Anyway you do realize that silver futures aren't silver, right? And that silver futures pricing isn't silver pricing, right? Stop fucking around in futures, thinking you can trade subtleties and nuances of the collapse. In the words of Ann Barnhardt, stop trying to trade the end of the world.

Thu, 06/14/2012 - 10:35 | 2525548 akenathon
Thu, 06/14/2012 - 11:29 | 2525824 eclectic syncretist
eclectic syncretist's picture

Silver and gold are technically speaking in consolidation patterns within longer term uptrends.  Anyone who has been in for the long haul should stay in now, because break outs from consolidations are where the big money is made.  Everyone knows it's going to be bumpy, but the big picture for PM is as good as it's ever been.

After similar consolidations in 2006 the prices nearly doubled.  Silver could hit 100/oz as early as next year.

Thu, 06/14/2012 - 11:51 | 2525909 Gringo Viejo
Gringo Viejo's picture

Over the last 10 years, I've seen much worse "straight line drops". Unlike the last 10 years, I've seen massive resistance to these manufactured takedowns over the last few days (watching the action on a minute to minute basis.) One day JPMs paper short position will be breached and  having been following this fraud since '93.....I think we're close. Asia has been the gamechanger. Know this....when it blows up.....you won't believe what's happenin'....even while it's happenin'. Stay Strong!


Thu, 06/14/2012 - 09:40 | 2525283 mrktwtch2
mrktwtch2's picture

if everyone is priceing in disaster..then it doesnt happen??

Thu, 06/14/2012 - 09:51 | 2525352 MeanReversion
MeanReversion's picture

The mother of all melt-ups, and then a return to realuty within a few days.

One thing can be said for sure, Monday there will be some move in the markets, and that move will be big.

Thu, 06/14/2012 - 09:53 | 2525360 junkyardjack
junkyardjack's picture

equals Profit!

Thu, 06/14/2012 - 09:40 | 2525285 RobotTrader
RobotTrader's picture

Dimon now exacting his revenge in the PM markets.

Thu, 06/14/2012 - 10:51 | 2525611 narapoiddyslexia
narapoiddyslexia's picture

Exactly my thought, as it hit right at 9am, right when he sat down at his desk and said, "Bring me my espresso, slave, and hit those silver fuckers in the mouth, now!"

Thu, 06/14/2012 - 12:02 | 2525948 Overfed
Overfed's picture

Sheeit. The only people getting hurt by PMs being hammered are those looking to sell right away. PMs get hammered when the big boys want to buy.

Thu, 06/14/2012 - 09:40 | 2525286 sabra1
sabra1's picture

funny that trading desks don't close down when a huge rally is imminent!

Thu, 06/14/2012 - 09:43 | 2525296 SilverIsKing
SilverIsKing's picture

They are not closing positions ahead of the down time so if a position is open, risk still exists.  Is this correct?

Thu, 06/14/2012 - 09:44 | 2525299 semperfi
semperfi's picture

This means that it ain't a-gonna happen.  I'd go all-in on the other side of this trade.

Thu, 06/14/2012 - 09:45 | 2525309 Bastiat009
Bastiat009's picture

FX markets are not moving as surprisingly fast as the PM market.

I am shocked that the euro is worth a dime. And I don't get why PMs trade like stocks (right when the stock market opens).

Thu, 06/14/2012 - 09:52 | 2525358 CommunityStandard
CommunityStandard's picture

Futures contracts are part of the calculation for determining spot prices for PMs.  These contracts are exchange traded and trade similarly to stocks.

Thu, 06/14/2012 - 10:08 | 2525423 Bastiat009
Bastiat009's picture

But not on the same market, not at the same time.

Thu, 06/14/2012 - 10:29 | 2525504 fuu
fuu's picture

And the trend continues.

Thu, 06/14/2012 - 09:46 | 2525318 RobotTrader
RobotTrader's picture

Seem like PM speculators always bear the worst brunt of "disorderly" markets.

Unlike investors who piled into retail stocks, which seem to enjoy the magic of "decoupling" by grinding up higher and higher forever.

Thu, 06/14/2012 - 09:49 | 2525333 LULZBank
LULZBank's picture

Can you suggest some nice stocks to invest yesterday?

Thu, 06/14/2012 - 09:53 | 2525362 SilverTree
SilverTree's picture

Seem[s] like PM speculators always bear the worst brunt of "manipulated" markets.


Retail stock investors will get ass-raped this and next year.


Pucker up.

Thu, 06/14/2012 - 09:46 | 2525320 kito
kito's picture

there is no major event coming when everybody braces for it. the major event will come when there is a lull, a calm, and then an unexpected BAM!. major crisis events occur when everybodys guard is down. this greek election will be a non factor. too many people expecting the worst.....wont happen.... it will just continue to drag, and drag....and when the politicians bedtime stories put all to sleep, then it will happen...........

Thu, 06/14/2012 - 10:00 | 2525387 SilverTree
SilverTree's picture

I agree although "major event" is a relative term. It will hit people in different ways across different timelines.

Thu, 06/14/2012 - 10:03 | 2525400 WineSorbet
WineSorbet's picture

Exactly right.  If you haven't learned by now that this is the ultimate setup for a rip your face off equity rally you deserve to lose your money.

Thu, 06/14/2012 - 11:19 | 2525761 eclectic syncretist
eclectic syncretist's picture

You can expect a big ramp in futures one way or another.  This weekend election thing is the perfect set-up for a market maker feeding frenzy on overleveraged positions.  Those who don't know how or choose not to respect risk are going to get fleeced, and they're being nice enough to tell you beforehand.  Probably for liability purposes when the fleeced sheep hire lawyers to get a minute fraction of their money back.

Thu, 06/14/2012 - 09:48 | 2525329 Iconomissed
Iconomissed's picture

Get the BIS on the Batphone.

Thu, 06/14/2012 - 09:50 | 2525345 Sudden Debt
Sudden Debt's picture



I love that guy!

When my silver and gold goes X100 I'll even buy him 12 rozes to put on his grave!

Thu, 06/14/2012 - 10:08 | 2525425 SilverTree
SilverTree's picture

100 bagger for gold, what would that mean for silver?

Thu, 06/14/2012 - 11:37 | 2525859 cbxer55
cbxer55's picture

The only reason it is down is because of falling oil prices. Take that out, everything else is up, up and away.


Thu, 06/14/2012 - 09:50 | 2525346 CcalSD
CcalSD's picture

50X leverage at Forex.com, bring it on!

Thu, 06/14/2012 - 09:52 | 2525354 Village Smithy
Village Smithy's picture

Stop shorting until there is some downward momentum, these guys can squeeze with unlimited amounts of free money, with the full blessing of every CB in the world. They will continue to do so until we don't give them the chance.

Thu, 06/14/2012 - 09:55 | 2525365 KandiRaverHipster
KandiRaverHipster's picture

race to the bottom!

wait that's some neo-liberal poli-sci talk

Thu, 06/14/2012 - 10:09 | 2525429 SilverTree
SilverTree's picture

Terminal velocity Bitchez!

Thu, 06/14/2012 - 10:13 | 2525445 localpacific
localpacific's picture

In regard to the FX markets this USD issue could be seen differently Forex Daily Market Review http://www.traddr.com/forum/topics/daily-market-review-by-fxcc-june-14-2012

Thu, 06/14/2012 - 10:31 | 2525524 omi
omi's picture

Tyler, Is it possible to post the skew and IV curve for next week?


Also, where can one get the option data on FX other than bloomberg? 


Thu, 06/14/2012 - 11:22 | 2525794 Piranhanoia
Piranhanoia's picture

"Oanda nother thing"  (Columbo Papacopteeveeshow)

Thu, 06/14/2012 - 11:41 | 2525872 Alejandrito
Alejandrito's picture

Decorrelation texas brent against sp500, signal bearish:


Thu, 06/14/2012 - 11:51 | 2525908 dcb
dcb's picture

Ok,if one draws the descending channel on uup, or the ascending channel on udn we are about to hit a new weekly high at the top of the channel. which mkeans it should fall back to the bottom of the channel again anyway.

Thu, 06/14/2012 - 12:35 | 2526085 Grand Supercycle
Grand Supercycle's picture

Rally warning continues...

Despite stockbears with their pre-election jitters, SPX choppy bullish daily & USDX bearish daily charts strengthen.

Significant equity / EURUSD upside & USDX retracement ahead.


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