Shrinking cost of FX options

Premiums are lower, as a result of "broadly lower volatilities" said the head of FX options at a bank in the US, [implied volatility is one of the functions that constitute an option’s price], "but currency pairs are moving a lot." Agreed another options manager at a bank in New York: "Spot is very active, but as the volatilities are not going up, it’s cheaper for clients."

The relative value, however, of using currency options has shot up, as huge exchange rate volatility seen in the past t