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Interpreting ATM FX Volatility Quotes as Annualized Percentages

Article Quant Q&A · Author: Ussu
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Summary

The document explains how to read a one-month at-the-money EUR/USD volatility quote. Its example gives bid and offer levels and asks what units they use. The response says FX volatility is conventionally quoted as a percentage and interpreted as annualized volatility, so the displayed levels represent volatility rates rather than prices or currency amounts.

It also clarifies the meaning of the ATM reference: the strike is set for a straddle with zero spot delta before accounting for premium. This convention matters when interpreting or comparing FX option quotes. The answer adds a typical range for EUR/USD one-month volatility as context, but provides no source, date, calculation method, or market conditions for that range. The explanation is brief and specific to the stated convention; it does not cover other ATM definitions, quote adjustments, or how to convert annualized volatility into a period volatility.

Key ideas

  • FX option volatility quotes are generally expressed as percentages and annualized.
  • An EUR/USD one-month ATM quote refers to a zero spot delta straddle strike without premium.
  • The quoted bid and offer are volatility levels, not currency prices.

Tags

ForexOptionsVolatility
Full text
# FX quoting convention


# FX quoting convention












I saw the quote as this: EUR/USD 1m ATM 0.3150/0.3190. I guess these are vol levels. What the units of these bid and offer quoted?

## Answer by river_rat (score 3)

https://quant.stackexchange.com/a/53997

Fx volatility quote conventions are typically esoteric and befuddling. For example, EUR/USD 1m ATM would be the volatility at the strike of a zero spot delta (without premium) straddle. The quote is in percentage, as is typical for vol so read that as an annualized volatility. (Side note, EURUSD 1m vols are between 3.7% and 15.0% typically)

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.