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G10 central banks have taken over as drivers of FX, benefitting CAD and European currencies at the expense of USD and JPY in G10.
Do you think mitigating foreign exchange risk right for your business?
Gamma is performing and vol curves are flattening amid the ongoing selloff in bond markets, EUR/EM crosses are standouts. Back-end (1Y) EM risk-reversals are depressed vs. ATMs, along flat curves, and severely dislocated vis-à-vis high implied yields.
Latin FX (MXN, CLP) riskies screen cheap; buy EURMXN 9M 25D R/R. In RV, buy EURINR – USDINR gamma spreads, fade elevated CAD-based correlations by selling carefully constructed CAD –GBP –AUD option triangles.
Index short term implied volatility lost -0.4pt on average (spot effect = -0.3pt).
The Euro Stoxx 50 3M ATM IV lost -0.4pt to 13.5% (vol effect =-0.2pt)
S&P500 3M ATM IV lost -0.3pt to 9.2% (vol effect = 0.1pt).
The EuroStoxx50 skew 3M 90%-110% decreased by -22bps to 7.0pt and the S&P500 skew 3M 90%-110% flattened by -30bps to 7.7pt.
Elsewhere, in equity derivatives markets:
INDEX 3M ATM IV (IV CHG = VOL effect + SPOT effect)
NDX 13.5 (-0.1pt = 0.2 + -0.3)
SPX 9.2 (-0.3pt = 0.1 + -0.4)
DAX 13.9 (-0.1pt = 0.0 + -0.1)
AEX 11.6 (-0.5pt = -0.1 + -0.4)
CAC 13.3 (-0.5pt = -0.2 + -0.3)
FTSEMIB 17.0 (-0.5pt = -0.3 + -0.2)
Volume: Index option activity was high yesterday. The EuroStoxx50 options were traded for Eur33.9bn (1.2x its 1M ADV). S&P500 options were traded for Eur271.2bn (1.3x its 1M ADV). Note that OMX was also active with Eur0.6bn traded (1.7x its 1M ADV). The EuroStoxx50 put/call ratio was at 1.4, SPX at 1.4 and OMX at 1.2.
Active Options: S&P 500: Aug-17 2485 (100%) Call for EUR4.4bn, Aug-17 2495 (101%) Call for EUR4.3bn. VIX is lower at 9.8% (down -0.1 pts).
Courtesy: Soc.Gen.
