Options traders witnessed heavy volumes in euro puts/Swiss franc calls last week as market players looked to the options market to express views on a further drop in the euro against the Swiss franc in the spot market. Last Wednesday the Swiss franc hit CHF1.549 against the euro, compared to CHF1.557 on Monday. Prop desks were the most active players, according to traders.
“Options on the pair are traditionally cheap because of low volatility, so people are attracted to the options market whenever spot moves,” said one trader. Despite the euro’s depreciation in the spot market, volatility rose only slightly to 3.96% on Wednesday, up from 3.85% on Monday. One- to two-month euro puts/Swiss franc calls, struck at CHF1.52 and CHF1.53, were the most popular options. The risk reversal was pushed to 0.5 vol, up from around 0.25 vol the week before, because of heavy bidding for euro puts, said traders. “This is a pretty big move, considering the low volatility on the pair,” added the trader.
