Mexico's Undervalued Equity Market Offers Long-Term Investment Potential 
Moldova Criticizes Russia Amid Transdniestria Energy Crisis 
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
US Gas Market Poised for Supercycle: Bernstein Analysts 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
2025 Market Outlook: Key January Events to Watch 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
Fed May Resume Rate Hikes: BofA Analysts Outline Key Scenarios 
Energy Sector Outlook 2025: AI's Role and Market Dynamics 
Trump’s "Shock and Awe" Agenda: Executive Orders from Day One 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
Geopolitical Shocks That Could Reshape Financial Markets in 2025 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
We have upgraded the risk bias around the forecasts from CHF negative to neutral. The pair (USDCHF) has been oscillating between 1.0060 – 0.9560 levels from the last couple of months. This long-lasting tight range-bounded major trend likely to prolong further.
OTC Updates and Options Strategy:
Amid the tepid underlying spot FX movements, let’s just quickly glance through above-implied volatility (IV) nutshell before deep diving into the strategic frameworks of USDCHF. CHF crosses are showing the least IVs among G10 FX bloc (1m IVs are at 5.65 and 4.48 for USDCHF and EURCHF respectively).
IV factor is highly imperative in FX option dynamics because the option pricing significantly depends on future volatility.
Ascertaining future volatility accurately is almost impossible for any FX veteran. Nevertheless, computing the marketplace’s expected future volatility is quite feasible using the option’s price itself which is known as implied volatility (IV).
The execution of options trading strategy: Contemplating above rationale, the recommendation would be on buying (2w) OTM 0.39 delta call while simultaneously shorting ATM call with similar expiries and buy ITM 0.79 delta call while simultaneously shorting an ATM call with similar expiries.
The rationale: The positively skewed IVs of 2w tenors are stretched on either side, and the underlying spot movement is wedged in a tight range.
Contemplating the above factors, this strategy is structured for a larger probability of earning smaller profitability but certain profit as USDCHF is perceived to have low volatility.
The highest return for this strategy is achievable when the pair at expiration is equal to the strike price at which the call and put options are sold. At this price, all the options expire worthless and the options trader gets to keep the entire net credit received when entering the trade as profit.
Risk/Returns Profile: The maximum return occurs at ATM strike. A smaller return is made between ATM strikes and the break-even points. The maximum loss is limited by OTM strike prices.
Effect of Volatility: The value of the options will decrease as volatility decreases, which is usually conducive for the strategy. An increase in volatility will be generally bad for the strategy as stated above.
Effect of Time decay: The value of the option decays as each day passes (good). Courtesy: Sentrix & Saxo
Currency Strength Index: FxWirePro's hourly USD spot index is inching towards -9 levels (which is neutral), while hourly CHF spot index was at -88 (bearish), while articulating (at 11:47 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
