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Derivatives

Middle Eastern Bank Sells Dollar Calls

High-net-worth clients of Banque Banorient (Suisse) recently have been selling U.S. dollar calls/Swiss franc puts, on the view that the dollar will weaken from the highs it set earlier this month when U.S. equity indices rebounded to near or past their pre-Sept. 11 levels.

Salim Diab, assistant manager and head of investments in Geneva, said the high-net-worth clients have sold three-month dollar calls because the Swissy has temporarily lost some luster due to better-than-expected U.S. corporate earnings. Analysts also attributed the gains in the dollar and U.S. equity markets to a successful campaign so far in Afghanistan. This has affected the Swissy more than other currencies as it is seen as a safe haven in times of trouble.

In a typical trade the clients sold calls with strikes of CHF1.65 when spot was around CHF1.645 earlier this month. Spot was CHF1.6345 Wednesday. The average notional value for the options was USD1-5 million and the premium on the options was 0.03% of the notional size.

The firm caters to wealthy Middle Eastern clients.

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