Swiss franc eyes on monthly PPI number

April's PPI: It is scheduled to announce the MoM PPI for April today. It going to be crucial factor for CHF as it measures the average change in price of goods and services sold by manufacturers and producers in the wholesale market. Switzerland's Producer Prices were increased to 94.39 index points in March of 2015 from 94.17 Index Points in February of 2015.

Q1 losses: SNB gave up its policy of trying to keep the Swiss franc from rising against the euro. The bank has had to book a massive loss on its foreign exchange reserves. Switzerland's central bank (SNB) booked a huge net loss for the Q1 of 2015.

Most of the loss about 28.0 billion Euros resulted from a drop in the value of the bank's massive foreign exchange reserves. Another CHF1.0 billion loss was booked as a result of a decline in the value of the bank's gold reserves.

Troublesome inflation: While inflation in Switzerland was printed at -1.1% which was a cause of concern. Consumer prices in Switzerland dropped 1.1% YoY in April following a 0.9% fall in the previous month driven by lower transport and accommodation cost.

Derivatives watch: (EURCHF, USDCHF)
Option Strategy: Long Butterfly

From last two months or so these pairs have been moving absolutely sideways even though there was an attempt for bouncing back in late April but collapsed back again.

So, while devising a trade framework we took this stagnant pattern into consideration. Hence, for long term perspective it is recommended to long butterfly than put ratio spread.  

It involves buying a put with a low exercise price, buy another put with a higher exercise price and sell two puts with an intermediate exercise price.

This can be established using all calls or all puts and is done for a net debit. It is executed by using four identical options with the same expiration date and on the same underlying asset but different exercise price. Bearish or Bullish depending on selection of short strikes.