- The historical ranges in EURUSD post the 2008-crash suggest that investors should stay away from shorting volatility in EURUSD for the month of September
- EURUSD month-end straddle prices for September suggest that long gamma strategies in EURUSD will outperform looking at the historical mean ranges
A look at how EURUSD has performed and what percentage ranges we can expect post the 2008 crash is instructive. This gives us an overall view of where our focus should be looking ahead for the month of September trading EURUSD.
Attractive value
First, we looked at the one-month straddle price for EURUSD, which cost approximately 1.92 percen. This gives you a break-even price to the upside of 1.3472 and a downside break-even price of 1.2964. This may sound expensive to some, but after looking at what we can expect historically for the month of September post-2008, there is a very attractive value in EURUSD to cover or speculate in the tail risk.
If you look at the historical mean range in EURUSD since 2009, we have on average seen 6.31 percent moves in EURUSD, with the minimum range being 4.64 percent (2009) and maximum range of 8.18 percent (2010). If we start by looking at the average mean range, we can see that historically the upside leaves EURUSD with greater potential with 4.05 percent.
This gives an average upside range of 1.3753 in EURUSD for September. On the downside the average mean range has been 2.23 percent which comes out to 1.2924.
Tail risk
If we look at the tail risk, which the market in general continues to focus on, then the maximum upside range for EURUSD looking at it historically would be 1.4263 and for the downside the maximum range would be 1.2291.
So in conclusion, stick with long-option gamma strategies in EURUSD for September because that is where the statistical bias is for making good risk reward trading setups using options, with relative large tail-risk profits compared to what mathematical model the Black Scholes suggest. Beneath we have given a more visual idea of what EURUSD could look by the end of September if history should repeat itself.