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
You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date
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.
By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited.
If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure.
Forex Options – An introduction
Forex Options – Exotic options
Forex Options - WebinarsBond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
