FxWirePro: Buy EUR/USD risk reversal in long term

With spot FX flashes of EURUSD at 1.1379 we see delta risk reversal for 1 week contracts have shown slight recovery signals but long term (1M-1Y) put contracts are on higher demand. As you can make out from the nutshell showing EURUSD still maintains the top 3 highest implied volatility of 1W at the money contracts among G7 currency space, almost at 9.6%.

As a reminder, this higher IV represents how much movement today's FX market expects from EURUSD during US sessions and the life span of the option. In that respect, an option buyer is partially buying the market's expectations for this pair.

More importantly, the contracts of this pair for 3m-1y expiries show gradual increase in negative sentiments. So, from this computation what we could read is that EUR may gain until Fed's rate decision and thereafter we could foresee dollar's appreciation as quite certain event.

Contemplating these factors and synthesizing while projecting the trend we understood the following fact.  

In foreign exchange (FX) market prices move to extremes more frequently and these extreme levels is referred to as "Fat Tails".

If more price actions occur at the fat tails, the option trader will mark volatility higher for out-of-money (OTM) and in-the-money (ITM) options then at-the-money (ATM) options and so does happen with EURUSD pair currently.

If there is no downside bias in market expectations of the underlying price then the price of volatility is symmetrical around ATM options.