Michael Schmeja, Global Head of Derivatives Sales, Saxo Bank
The USD regained a bit of ground after Fridays stronger closed and in early Asian and Europe trading. Volatility is a bit of a mixed bag. While we see the 1 months atm a tad higher in EURUSD and cable, EURUSD is 12.35 after 12.00 and cable is 10.85 after 10.45 on Friday, USDJPY volatility is unchanged. The JPY crosses look a touch more offered about 0.2-0.3 lower than Friday.
I would expect most lows we did see Friday to act as support, in fact for cable for example we haven’t traded below at 10.30 handle after Lehman’s collapse in 2008. If the range trading persists we shall see new pressure coming up on volatility. There have been no large trades in the brokers. Deals worth of note have been in USDJPY after the election where mainly short dated upside was in demand with no significant changes in volatility.
Risk reversal have increased a bit in EURUSD and cable to 1.20 from 0.95 in EURUSD and 1.35 from 1.20 in cable. (quotes for 1 month 25 delta’s). Not surprising with a bit more pressure on spot, but not enough to get the market excited. We have some expiries worth of note in EURUSD around 1.2600 with talk of a couple of hundred million for tomorrow.
Scandie vol is also unchanged and with spot lower I am decaying day by day my short EURNOK Call. The EURJPY structure runs out on Thursday and there will be hopefully an opportunity to sell the remaining EURJPY spot position above 112.
Otherwise, nothing to report, good luck with your trading.
Short term Trading ideas:
EURJPY
Comment:
I buy spot, notional 1 at 111.25
I buy expiry 1 month 15th of July a 109 EUR Put, notional 1
I sell expiry 1 month 15th of July a 114 EUR Call, notional 1
Cost of 23 JPY pips on a notional of 1, after I bought back the 0.55 overhang. I sold 75% of my spot position at 111.95. Depending on the price action I will trade the spot until expiry against the option.
EURNOK
Comment:
Sold EURNOK Call, Strike 8.0700, Exp 1 month, 26th of July for 510 NOK pips
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