Volatility Quoting

Currency options are usually quoted in volatility rather than in money. A dealer names a level of implied volatility for a given expiry and strike convention, and the cash premium is then calculated from it with an agreed pricing model and the current market inputs. The quote is therefore stable in a way a cash price is not: the premium moves as the underlying rate moves, while the volatility quote need not move at all. The convention exists because it makes contracts comparable. Quoting in volatility strips out the effect of the current rate and of the notional, so two contracts on different pairs, or on the same pair at different times, can be compared on the one dimension the market is actually trading. It is also why commentary discusses currency options in percentages that are not price moves, and why a desk talking about how a pair's options are priced means the shape of the quotes across strikes and expiries rather than any single number. The precise conventions — which model, which inputs, which strike references — belong to the quoting market and are stated by it, so they are read from the source rather than assumed.