Urban studies: Doing research when every city is different 
Rice feeds billions of people – but its role in fueling climate change is growing 
Detroit’s high property taxes are driving a housing affordability crisis – how can city leaders bring down costs? 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
AI-Driven Memory Chip Prices May Be Skewing U.S. Inflation Data, Fed Minutes Suggest 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
Stock Futures Dip as Investors Await Key Payrolls Data 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Silver Sheds Gains in Gold’s Wake as Bears Probe Key $74.50 Support; Sell-on-Rallies Eyes $70 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
We take the opportunity to analyse what generally works on the MXN vol surface, on a back-tested basis and from a pure vol standpoint. The 1st chart analyses a variety of structures, all for 6M maturities.
For instance, selling RRs (delta-hedged) works orders of magnitude better than selling ATM vol (1st chart - bottom, Sharpe Ratio of 0.87 vs. 0.15 over past 5-yrs). Better yet, 1*1.5 ratio USDMXN call spreads (delta-hedged) have been notably a high Sharpe Ratio (1.66) trade to hold over the years. Being long ATM vs. short OTM calls at near vega neutral notionals, the 1*1.5 ratio call spread structure is also well positioned to be selling topside OTM vols, which now are priced heftily after the latest vol explosion. Also, 1*1.5 ratio calls come near the optimal ratio to maximize Sharpe (refer 2nd chart). At a Sharpe around 0.75, ratio USD put spreads have been decent trades, but nothing remotely close to the ratio USD call spreads.
Buy delta hedged 6M USDMXN 1*1.5 ratio ATMF/25D call spread @15.1 choice vs. @17.1/17.35 indic vols.
Directional 1*2 ratio call spreads and RKO calls: As an equivalent directional expression for those who want to stay short MXN peso 1*2 ratio USDMXN naked (not delta- hedged) call spreads have returned a Sharpe of 1.85 over the past 5-yrs. The trade has a large left tail risk, being exposed to large drops in the peso. USDMXN call RKOs are another expression worth considering, as they efficiently fade rich skews. The structure would benefit from well behaved and contained spot action, but most importantly it carries well defined downside risk (namely, the premium paid).
Buy 2M USDMXN RKO call (20.70/22.00 strike/barrier) for 40bps USD (after 2% stealth), spot ref 20.1928 levels. Courtesy: JPM
Currency Strength Index: FxWirePro's hourly EUR is inching at 37 (which is bullish), USD spot index is flashing at -16 levels (which is mildly bearish), while articulating (at 11:33 GMT). For more details on the index, please refer below weblink:
