Dear FX Option Trading Community,
I am a newbie trader (just started on the desk at a bank as a junior) and need help with understanding broker quotes.. Apologies if this is very basic, I am still learning..
For the following examples of broker quotes,
EUR 6m 25d RR flat/0.2 ept
You would enter the parameters in the options pricer.. solve for vol.. So EURUSD 6 month 25 delta Risk Reversal...European put option - implying EUR is the put?. What does the flat/0.2 mean? And how do I use this information?
YEN 3m 25 delta fly tkc 0.175/0.3
What does the 0.175/0.3 represent? How do I use this to compare if my vols are marked correctly?
JPY 6m vs 1 yr atm NY vn 0.45/0.65
This translates to USDJPY 6m ATM option ag 1y ATM NYC vega neutral
I understand how to find mid-vol by solving vega net = 0 through playing with the notional. I don't get what this end 0.45/0.65 represents. What is it?
Yen 5y 115 vs 125 vn 0.225/0.575, if inside
The answer I got is 10.27 ag 10.66 (mid vol) using my pricer..I thought the brokers were suppose to assist in price discovery. Usually they publish a price (bid/ask) at the end of the quote. I am confused on what 0.225/0.575 represents ? When they say "if inside" what does this actually mean>
Many thanks
EUR 6m 25d RR flat/0.2 ept - flat is 0, means bid is call and put are same, and typically positive means call is 0.2 vol over the put is the offer
YEN 3m 25 delta fly tkc 0.175/0.3 - this is compared to the 3m atm, so the wings (25d put and 25d call) are 0.175 bid higher than the atm, and 0,3 offered higher than the atm
JPY 6m vs 1 yr atm NY vn 0.45/0.65 - just the vol of 1y atm - 6m atm, it'll trade vega neutral as in you'll have to buy/sell more of the 6m relative to the 1y in notional, but always quoted in vol
Yen 5y 115 vs 125 vn 0.225/0.575, if inside - again just the vol differences between strikes, everything is quoted in vol and just have to remember that doesn't change even if vega neutral (just the notional changes)
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