OPTION VOLATILITIES
The US dollar is markedly lower this morning following Fridays lower than expected 2Q GDP. With evidence of a slowing economy, it is becoming less and less likely that the Fed will move to tighten at the end of August. Pressure on the Chinese government regarding Yuan reform has been intensifying. Internal, as well as external voices have increased calling for greater flexibility in Yuan valuation. The Chinese currency has been trading at its highs against the USD. Tensions in the Middle East continue with Israel agreeing to a 48 hour cease-fire to allow for humanitarian aid to enter Lebanon. US Secretary of State Condoleeza Rice once again traveled to the region this past weekend, and for the first time, has called for a cessation of the violence.
Vols are higher with the increased market activity. The pronounced skew in USD/JPY vols has returned. 1 month 25 delta USD/JPY risk reversals are being priced with JPY calls trading at a premium of 1.0 vol over the JPY puts.
OPTION TRADE IDEAS
Below please find some strategies, which depending on your view might be applicable. Please bear in mind that all of these trades can be applied to any of the currency pairs, which may be traded. All barrier levels, strikes, triggers, payouts, and maturity dates can be tailored to each individuals views.
View: After its recent move the USD/JPY will settle into a tight range this week
Trade: Purchase a 1 week USD/JPY Double No Touch
View: The EUR/USD will continue its move to the upside
Trade: Purchase a 1 week EUR/USD Digital Call Option
View: GBP will depreciated compared to the USD this week
Trade: Purchase a 1 week GBP/USD One Touch Option
View: The AUD/USD will climb higher this week
Trade: Purchase a 1 week AUD/USD No Touch Option
For further details, please contact the options dealing desk at 1.212.897.7660 or toll free at 1.888.50.FOREX.
