EURJPY began this week at 127.231, now drifting below 125.300 levels (i.e. almost 1.29% in spot FX terms).

The euro-yen pair prolonged to the southwards and dropped to the lowest levels since 25th March as markets continue to bid up the Japanese currency in response to the extension of the risk-off sentiment into Asia as both the stocks and oil markets continue to dive.

While articulating, EUR/JPY recovers to 125.628, still down -0.90% on daily terms as it opens today at 126.780, after having pushed below 7 & 21DMAs in early trades.

ATM implied volatilities to begin this week were at 8.85%, now at 9.36%.

While, the ATM puts are trading at 16.40% more than NPV (see diagram for premiums and NPV), which means that there exists the disparity between ATM contracts and their IVs. Thanks to spot vols..!

Perhaps what is more interesting in this tricky situation of the disparity exists between IVs and pricing is that something called "time decay' of these instruments which are likely to wipe off in ATM contracts.

For those who've followed "Delta hedge" strategy, for reducing underlying spot FX movement risks involved in an option’s trade whilst sustaining the opportunity to profit from change in volatility.

If you are long in an option, the time decay will work against you, whilst if you are short the decay is with you.

Thus, please be mindful of impact of time decay (Theta) for an ATM option approaching expiry.