FxWirePro: Does delta risk reversal indicate expensive EUR/CHF calls? Never miss short term uptrend via positive rho BPS

For next 1 week we are projecting short term uptrend for EURCHF as the slight positive flashes of delta risk reversal signifies some sort of upswings on this pair is anticipated as matter of hedging. But for long term view persists over next one year divulges that the expectation of weakness in next future.

Since the premiums on 1W call options are costlier regardless of swings in short run (see delta risk reversal), one can get benefitted from bull put spreads.

Since bull put trade rho is positive, it would mean that higher interest rates are helpful to your position (you make money when interest rates increase and lose money when they decrease). In fact, higher interest rates would increase the value of the naked puts.

When interest rates rise, there is more convenience to keep money in your bank account then investing it on any other investment avenues. However, when you choose to control the same amount of investments using a much lower amount of money through the sale of put options (or purchase of call options), the remaining cash continues to earn interest in your bank account.

As a result, when interest rates rise, the sale of put options (or purchase of call options) becomes more attractive than the purchase of underlying currency. Consequently, the increasing demand justifies a slightly higher price as measured by the options rho value.

The bull put spread is a short-term strategy and as rho decreases in value when options get closer to expiration, rho will likely be a low value meaning that options are expected to rise when increase in interest rates.