At Any Rate Global FX Derivatives: Thin Cushion. A Slippery Slope from Calm to Uncertainty
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Jun 30, 2025 Dive into the swirling world of FX derivatives as the hosts analyze the current volatility landscape. Expect insights on trading strategies involving the dollar and high beta pairs. The discussion emphasizes the Swiss franc's potential to outshine the yen, along with key carry trades to watch. Key themes include managing risks and strategic hedging approaches in response to economic indicators. This is a must-listen for anyone navigating the complexities of the currency market in uncertain times.
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Dollar Moves and Risk Reversals
- Large six-month declines over 5% in the dollar are rarely followed by sharp rebounds. - Dollar risk reversals tend to underperform in this scenario, making out-of-the-money dollar puts less viable.
Finance Long Vol with OTM Puts
- Use selling of out-of-the-money dollar puts to finance long at-the-money option positions. - This strategy helps reduce option time decay in a market with rich put skew.
Carry Efficient Alternatives to Yen and Euro
- Bullish yen trades suffer from stretched spec positioning and high carry costs. - Consider alternatives like bullish CNH with lower carry and positive carry in Eurosing for euro exposure.