USD risk-reversals should be pressured further to align with the impulsive retracement in spot.

The delta risk reversals with positive has been neutral for all time frames but gradually favours downside hedging risks over the longer period of time, but in short run it has been bullish neutral.

From almost last one year we've been seeing the pair oscillating within stiff sideway trend (ranging 1.1480 to 1.05 levels).

While current IVs of 1W ATM contracts of euro crosses are crawling reluctantly at 7.15%, a massive drop from recent times, as a result option premiums likely to shrink away on account of time decay.

Derivatives strategy for non directional EURUSD:

Since the EURUSD's implied volatility is perceived to be comparatively minimal from other major G7 pairs and neutral risk reversal sentiments, accordingly we construct a multiple leg of option strategy for regular traders of this currency cross when there is little IV. A total of 4 legs are involved in the condor options strategy and a net debit is required to establish the position.

EUR/USD’s non directional pattern is persisting from last one year or so, but some bullish neutral indications are observed, slight bearish pressures can be seen in the days come, hence, we prefer this strategy there is a massive collapse in implied volatility.

The trader can construct a long condor option spread as follows,

As shown in the figure, the trader can implement this strategy using call options with similar maturities.

As shown in the diagram, the strategy goes this way, writing an In-The-Money call and buying deep striking in-the-money call, writing a higher strike OTM calls and buying another deep striking out-of-the-money call for a net debit, all strikes should have similar tenors.

Risk reward profile:

Maximum returns for this strategy is attained when the spot FX of EURUSD drops between the 2 middle strikes at expiration. It can be derived that the maximum profit is equal to the difference in exercise price of the 2 lower striking calls less the initial debit taken to enter the trade.

The maximum possible loss for this strategy is equal to the initial debit incurred when entering the trade.

It happens when the underlying spot FX on expiration date is at or drifts below deep ITM strike price and it is also possible when EURUSD at or above deep OTM strike price.