Using the options market to trade the ECB meeting

With the ECB meeting in play, we can look at EURUSD overnight implied volatility (currently 13.55%) and use this to understand the degree of movement expected by the market. The daily straddle looks at the extent of movement (higher or lower) with a 68.2% of confidence that price will be contained within this range. The 10-delta strangle looks at strikes which have a 10% chance of being exceeded and therefore portrays an outlier move.

Traders can use this really effectively to manage risk, or as a new approach to intra-day mean reversion. One can add Bollinger bands or pivot points for confluence of levels.