AUD/USD: Markets favor OMT puts amid trade war fears

• AUD out-of-the-money (OMT) put value has risen sharply in the last three days.
• Investors are likely expecting a deeper drop in the Aussie dollar amid rising US-China trade war fears.

 The AUD/USD one month 25 delta risk reversals (AUD1MRR) have dropped to -0.95 today vs -0.73 on July 9.

The rise in the implied volatility premium for AUD put options (bearish bets), as represented by the slide in risk reversals, indicates the investors are expecting a deeper drop in the AUD/USD amid escalating US-China trade tensions.

At press time, the AUD/USD pair is trading at 0.7370, having dropped 1.2 percent on Wednesday.

AUD1MRR