The Swiss National Bank (SNB) today kept policy rates unchanged at its quarterly meeting as expected by most market observers, i.e. the 3M Libor target and sight-deposit rate were kept at -0.75%.
This sent EUR/CHF lower as some probability of a rate cut was priced in ahead of the decision, albeit this had been markedly reduced after the ECB went for the 'light' easing menu last week.
Hedging Frameworks:
From the nutshell, 25-delta risk of reversals of EUR/CHF the most expensive pair to be hedged for downside risks after AUDUSD as it indicates puts have been over priced.
As it showed the highest negative values indicate puts are more expensive than calls (downside protection is relatively more expensive).
Since IVs of ATM contracts are sinking 1w to 1m timeframe among G10 space, no much dramatic movements would be expected in OTC but downside sentiments likely to persist.
With the above IV and risk reversal reasoning, we recommend arresting further downside risks of this pair by Put Ratio back-spread instead of strips which involves extra cost.
Strips employs an ATM call along with the puts double the size of call, but the above recommended strategy suits IVs and risk reversal scenarios.
Those who are so bearish in medium run but sideways or some abrupt spikes in short run ATM shorts with very shorter term expiries are recommended.
By doing so, you can not only participate in tiny rallies or sideways within 2-3 days time but also reduces the cost of hedging because of the initial receipt of premiums.
Whereas, strips cost extra by deploying an additional call option in this strategy and sharp jump in adverse scenario is needed for this strategy which seems unlikely in this pair.
So, purchase 2W 2 lots of At-The-Money -0.48 delta puts and sell 3D or 1w one lot of (1%) In-The-Money put option.


FxWirePro: AUD/USD edges higher as US CPI looms large
FxWirePro- Woodies Pivot
FxWirePro: USD/ZAR rises as hot US inflation boosts Fed rate hike bets
EURUSD Plummets Below 1.1150 Support as Hot U.S. CPI Sparks Bearish Momentum
FxWirePro: EUR/AUD recovers from early decline but bears are not done yet
EURJPY Pullback Stalls: Short-Covering Bounce Faces Overhead Resistance Near 177.60
FxWirePro: USD/JPY eases slightly , but outlook is bullish
FxWirePro: USD/CAD uptrend loses steam, remains on bullish path
Major Pair Currency Score - EURUSD Bearish, USDCHF Bullish, and Key Levels to Watch
FxWirePro: GBP/AUD tight ranges prevail as market waits for fresh catalyst
FxWirePro: GBP/NZD uptrend loses momentum but bullish setup remains
FxWirePro: GBP/AUD consolidates ahead of UK economic data, downside risks remain
GBPJPY Bounces Off Support: Bulls Target 212 as Short-Term Moving Averages Align
NZDJPY Technical Outlook: Bullish Momentum Builds as Price Tests Key Support Levels
FxWirePro- Major Crypto levels and bias summary
JPY Major Currency Score - EURJPY Bearish, All Other Major Neutral




