Derivs - FX

Institutional investors in France, Italy and Switzerland are increasingly showing interest in structured notes on volatility target underlyings, driven by current low yields in fixed income markets and attractive OTC budgets.

A mix of hedge funds and credit valuation adjustment desks are buying deep out-of-the-money payers with April expiries on the iTraxx Main and to a lesser extent the Crossover indices in what was a fairly active week in credit options. Flows skewed towards long volatility and hedging strategies.

The China Financial Futures Exchange plans to introduce a China volatility index and launch futures and options trading on it once the bourse completes the introduction of CSI 300 options later this year.

Investors have been buying short-dated calls on the US dollar against the Japanese yen in the current low volatility environment. There has also been demand for longer-dated risk reversals in the currency pair.

Investors globally have been selling volatility on Latin American currency pairs in order to generate premium following a recovery in the region's currencies. Such trades are standing out in what has been a quiet week in fx options due to record low levels of volatility.

New credit default swap definitions published by the International Swaps and Derivatives Association last month could lead to the creation of a bifurcated market when they become effective from September, according to market participants.

Total cleared contract volume in equity options and futures in March 2014 increased 14% year-on-year, according to data from the Options Clearing Corporation.

The Korean financial regulator has delayed a planned expansion to the country’s derivatives-based product lineup as its grapples instead with an unrelated credit card scandal.

Hedge fund investors and some asset managers are entering short-dated puts and put spreads on the Nikkei 225, targeting strikes between 14,000 and 14,800.

Alexandre Werno, senior adviser to the general manager at Fortune SG Fund Management in Shanghai, has been promoted to executive vice general manager as the firm looks to expand into index-linked offerings in China.

Investors have been entering June, September 2014 1.5 x 1 call calendar ratios on the Nikkei 225, targeting strikes of 16,000. The trade involves selling 1.5x June call and buying a September call.

India's central bank approved more flexible hedging options for companies trading in foreign currencies