FXO Market Update - CHF in demand FXO Market Update - CHF in demand FXO Market Update - CHF in demand

FXO Market Update - CHF in demand

Summary:  Big risk-off move yesterday with S&P down 4%. Market moving back in to safe haven and CHF was one of the big mover where hawkish comments from SNB added to the rally. EURCHF dropped 1.5% and 1 month vol spiked 1.40 vols higher to 8.40.


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.

FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week.
Source: Bloomberg, Blue: EURCH spot, Black: EURCHF 1 month vol

Big risk off move yesterday with S&P down 4%. In FX we saw big move in to safe heaven where the biggest mover was EURCHF which dropped 1.5% as hawkish comment from SNB supported the move. USDCHF has been one of the favorite longs over the last months and we see positions being reduced now and it is likely we can see more buying of CHF. First support in EURCHF comes in at 1.0200 and the big support is down at 1.0000, which is the low from beginning of March.

EURCHF 1 month is up from 7.00 to 8.40 in two days and 1 month risk reversal has moved from 0.40 to 1.00 for EURCHF puts. This is the highest level in EURCHF 1 month since the beginning of march when 1 month spiked up to 10.25 after Russia invaded Ukraine.

We like to play further downside in EURCHF with ratio put spreads or covered put after the big move in spot over the last days and the spike in vol and risk reversal.

Buy 1 month 1.0200 EURCHF put in 1 mio
Sell 1 month 1.0000 EURCHF put in 2 mio
Cost 30 pips
Alternative

Sell 2 week 1.0150 EURCHF (covered) put
Receive 24 pips

Spot ref.: 1.0295

Source: Saxo Bank
  • The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking.
  • Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”.
  • Change: The difference between current price/volatility and where it closed 1w ago.

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