Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
OTC Derivatives Trading
Summary: EURHUF has traded up from 350 to 360 over the last month after a more dovish NBH than expected at the last meeting and as the market trades in a risk off mode. 1 month vol has traded up from 5.50 to 7.00 and risk reversals trades better bid for upside. We see good value in selling EURHUF calls after the rally in spot, vol and risk reversals.
Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these.
EURHUF has traded up from 350 a month ago to currently trade just below 360 after a more dovish NBH at the last meeting and as the market has turned to trade in risk off mode over the last weeks. The first resistance on the topside is the July highs at 362 before the double top at 369.
Vols have traded sharply higher with the move higher in spot. 1 month has moved from 5.5 vol a month ago to currently trade at 7.0 vol which is at the high end, 78th percentile, of last year’s range. The risk reversals have followed spot and vol higher with 1 month up from 0.5 to 0.75 favoring topside.
We like to sell some EURHUF calls with spot, vol and risk reversal all trades relative high compared to history.
Sell 2 weeks 362.50 EURHUF call
Receive 60 pips
Alternative
Sell 1 month 365.00 EURHUF call
Receive 105 pips
Spot ref. 358.50
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If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received.
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