European financial markets, including EUAs, were characterised by risk-off events at the end of May, but EUA prices clawed back almost all their value over 4-8 June, albeit in a choppy trading week. The market hit a seven-year high of 16.7 €/t in within-day trading mid-week but closed Friday at a less stellar 15.85 €/t. Historic 15-day d/d volatility is now trading over 50%, double the 25% seen in the oil market over the same period. EUA volatility seems rooted in price direction concerns, with the options markets reflecting concerns over how much further the price upswing seen since July 2017 has to run. Back in mid-March, the skew in option open interest (OI) for calls was pronounced, with the level of OI in puts at just 46% of that for calls. That had changed by the end of last week, with OI in puts now at 76% of that for calls. This reflects a market with a lot of participants looking to take out some insurance to protect against a downside price correction. Of more immediate concern regarding options is that the 20 June expiry date for Jun-18 options on ICE is hurrying near. At the end of last week, OI on Jun-18 call options was 26.6 Mt, with 20.8 Mt currently in the money (at strikes <15.5 €/t). Another 1 Mt at most could probably be in the money if underlying EUA prices by next week’s expiry are back above 16 €/t, although 2.5 Mt could be out of the money if prices drop below 15 €/t. We expect that all of the in the money calls have largely been hedged, while most of that volume will be sold back into the market on the day of expiry. If the underlying EUA market is looking for a downward trigger, then 20 June will be a test of downside pressure and we expect that the market will anticipate that sell-off in the coming week and prices could ease further.