On Tuesday at 16.00 CET our sold 2W CHF/JPY 105.50 straddle expired with a profit of 0.72% (spot ref.: 104.51).
Our short GBP/SEK position was stopped out at 10.25 with a total loss of 2.66% (FX return: -3.02%, carry: +0.36%).
Correlation between CHF and JPY stable but volatility too low
On May 28, we recommended to utilize an up spike in implied volatility to sell a 2 week CHF/JPY 105.50 straddle as we expected the cross to continue to trade within a relatively narrow range in the near term. Volatility has declined since, as the CHF/JPY continued to range trade. On Tuesday at 16.00 CET, the strategy expired and we booked in a profit of 0.72% (spot reference at maturity: 104.51). While the correlation between JPY and CHF is likely to remain intact going forward The spread between implied and realized volatility currently trades below the median of 1 year of observations and, in our view, implied volatility looks too low. Thus, the risk/reward of selling CHF/JPY straddles/strangles is not attractive at this stage.
To Read the Entire Report Please Click on the pdf File Below.
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CHF/JPY Straddle Expired And Short GBP/SEK Stopped Out
Published 06/12/2013, 09:02 AM
Updated 05/14/2017, 06:45 AM
CHF/JPY Straddle Expired And Short GBP/SEK Stopped Out
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