OTC outlook:

The 1m implied volatilities are screaming off as the major euro crosses have tumbled considerably ahead of the expectations from tomorrow's dovish moves by ECB.

The skewness in 1m IVs displays the positive numbers to signify the efficiency of OTM call strikes.

While the risk reversal table evidences the rising upside risk sentiments among G10 currency space, do you reckon that the 1w RR is overreacting due to tomorrow's economic event but likely stabilize in coming months. IV and risk reversal readings of EURUSD and EURGBP have been the best buys on the respite from sellers.

While delta risk reversals flashing up progressively with positive numbers that signify hedging sentiments are more for upside risks over the period of time.

Hedging bets:

Hence, considering OTC market reasoning we think upside risks are still on the cards, as a result, we reckon deploying ATM instruments in hedging strategies are worthwhile.

The spot FX of EURGBP is trading at 0.8350 and is anticipated to spike up moderately in the weeks to come.

1W ATM calls are trading just shy above 11.6% more than NPV, while IVs are at 13.31%, so we think the pricing has been quite reasonable.

Hence, we decide to initiate the bull option combinations at net credits capitalizing on IVs, RR, and fairly-priced ATM calls.

So, buy mid-month at the money calls with 50% delta, simultaneously, short 1W (-1%) in the money put with positive theta.