Leveraging FX futures and options to navigate volatile market conditions
FX has seen a remarkable increase in volatility observed in the four months after the U.S. election in November last year compared to the prior 10 months. Key announcements made by the new U.S. presidential administration, along with its wider pledge to upend global trade, have led to large market moves in a wide array of currencies across G7 and EM pairs. Volatility has increased by up to 60% or more in some currency pairs such as EUR, CAD or CNH.
In turn, higher FX volatility and the resulting substantial increase in daily trading ranges across most currency pairs represents a significant opportunity for market participants. In particular, comparing the average daily range of the futures market to its average bid-ask spread can provide traders with a savvy way of assessing opportunity for profits while looking into trading a new financial instrument.
| Volatility | Range/Spread Ratio | |||
|---|---|---|---|---|
| % Increase in Volatility Between NOV 2024 - FEB 2025 and Prior 10 Months | Jan-Oct 2024 | NOV 2024 - FEB 2025 | % Change vs JAN-OCT 2024 | |
| EURUSD | 61% | 85.3 | 130.65 | 53% |
| USDJPY | 3% | 105.54 | 100.2 | -5% |
| AUDUSD | 16% | 85.3 | 88.95 | 4% |
| GBPUSD | 27% | 67.24 | 80.65 | 20% |
| USDCAD | 42% | 57.91 | 72.62 | 25% |
| USDCNH | 40% | 16.38 | 23.91 | 46% |
*Range/Spread refers to the average daily range divided by the average daily Bid-Ask spread in the CME FX Futures marketplace. Range is defined by the day’s market high minus the day’s market low.
Source: Range and Spread data: CME Group; Volatility data: Bloomberg.
CME Group FX futures and options markets offer market participants a deep pool of lit, firm, anonymous all-to-all FX liquidity to navigate the volatile market conditions. Volume growth was particularly strong in currency pairs which have seen the strongest increases in volatility, such as EUR and CAD, with FX options volume growth in these pairs showing the best performance overall.
FX futures and options average daily volume (ADV) reached $101B notional, a growth of 17% over the period Jan 2025 to 18th March 2025 compared with the same period last year. See below for G5 currencies:
| Average Daily Volume, JAN - 18 MAR 2024 ($mln) | Average Daily Volume, JAN - 18 MAR 2025 ($mln) | Average Daily Volume Change, JAN - 18 MAR 2025 vs. Same Period 2024 ($mln) | |
|---|---|---|---|
| EURUSD Futures & Options | 35,906 | 42,245 | 18% |
| JPYUSD Futures & Options | 15,649 | 17,773 | 14% |
| AUDUSD Futures & Options | 7,369 | 7,475 | 1% |
| GBPUSD Futures & Options | 9,049 | 10,497 | 16% |
| CADUSD Futures & Options | 6,696 | 9,986 | 49% |
Source: CME Group
- FX options volumes were up by 87% YoY, while futures volumes were up by 14% in $ notional terms.
- Volume growth was the strongest for EUR and CAD options, at 125% and 170% respectively. JPY options were up 60%.
- JPY options set a new record on the 17th of March with $7.7B traded.
- CAD futures volumes were also up 45% over the same period.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
