It does come as a surprise that - contrary to other risk events such as the Brexit referendum etc. - the SNB does not create a buffer of CHF weakness which would prevent the franc from appreciating excessively in the case of a risk-off event (in this case: a Donald Trump election victory).
EURCHF trading just above 1.08 does not really constitute “CHF weakness” in my view. Does the SNB expect a Clinton victory with such certainty? That would be careless. However, the alternative explanation is even more worrying: that it is tired of interventions.
OTC updates:
Please be informed that the implied volatilities of EURCHF ATM contracts of all expiries have been the least among G10 currency segment.
While the 25-delta risk of reversal of EURCHF has also not been indicating any dramatic shoot up nor any slumps, but seems to be one of the pairs to be hedged for downside risks as it indicates puts have been relatively costlier.
Option-trade recommendations:
We could still foresee range bounded trend to persist in near future but little weakness on weekly charts is puzzling this pair to drag southward targets but very much within above stated range.
As a result, we recommend below option strategies using right options, thereby, one can benefit from certain returns.
How to execute iron butterfly spread:
At current spot at 1.0785, one can prefer this strategy on the same lower IV circumstances. To execute the strategy, the options trader buys a lower strike OTM put, sells a middle strike ATM put, sells a middle strike at-the-money call and buys another higher strike OTM call. This results in a net credit to put on the trade.
Overview: Slightly bearish in short term but sideways in the medium term.
Time frame: 7 to 10 days
Volatility expectation: Low volatility.


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