Derivs - FX

Users looking to hedge exposure stock market swings are being advised to buy certain fx options to buffer against volatility. One strategy touted by Merrill Lynch is to buy puts on the Canadian dollar and calls on the Swiss Franc.

Multi-currency structured products are derivatives whose payoffs depend on multiple underlying currency pairs.

Jeffrey Mayer, the former global co-head of fixed income at Bear Stearns, is set to join UBS on Wednesday as joint global head of fixed income, currencies and commodities and related derivatives.

Risk reversals flipped in favor of euro calls this week as the U.S. dollar sold off in response to the government’s massive Street bailout package.

The fx options market is stuttering as volatility explodes, but those still active are looking to short dated downside strikes on the USD/JPY.

Standard Chartered is hunting for a global head of institutional sales, a new role which will include selling structured products across credit, fx, commodities and equity.

Carry trades with risk-averse currencies such as the Japanese yen drove the U.S. dollar down Monday, while the options market stalled, following Lehman Brothers’ intentions to file for Chapter 11 bankruptcy protection.

Demand for downside New Zealand puts against the U.S. dollar pushed one month risk reversal premiums up to 2.75% as investors scrambled to take positions after this week’s dramatic slashing of central bank rates.

It is a good time to sell USD/CNY non-deliverable forwards and buy CNY spot, according to fx analysts at Societe Generale.

Implied volatility on the euro/U.S. dollar cross shot up to 13.6% Tuesday, the highest it has been for seven years, as the market reacted to the Fannie Mae and Freddie Mac bail-out and concerns about the Eurozone.

Market makers such as investment banks have been left short fx gamma after the spot market’s dramatic moves last week, which could drive up hedging trades as they try to rebalance the books.

Fx analysts at Société Générale predict a glut on sales of USD/KRW non-deliverable forwards amid reports that South Korea intends to lift the ceiling on the amount of dollar/won NDFs foreign investors can buy.