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22 Apr 2015
Credit Suisse: Positioning for Greece and price of uncertainty on the euro – eFXnews
FXStreet (Barcelona) - The Strategy team at Credit Suisse, shares the possible trade setups for EUR/USD for different scenarios of Greece risks and euro uncertainty, as noted by eFXnews.
Key Quotes
“It is probably not true that the EUR has ignored Greek risks. Without needing to price in this issue, EUR would likely have lower implied volatility, less skew in favor of EUR puts and arguably a higher spot price. EURUSD might be challenging the top of its recent roughly 1.0450 – 1.1050 range rather than languishing near the middle.”
“Market participants who think Greek risks can subside within three months should be looking at the possibility of a meaningful EUR pop higher over that time frame.”
“Market participants who like us think the underlying trend in EUR is lower across the board due to negative euro area core rates – but also think Greek risks can diminish in the next three months – should look to exploit the skew surface by buying EUR put spreads or EUR puts with reverse knock outs (RKOs). We have introduced both varieties into our trade idea portfolios in the past two weeks.”
“Market players looking for a default outcome in Greece in the next three months should be aware that to some extent this is already in the price. Of course both implied volatility and skew in EUR can rise further, much as Greek bond yields and European equities implied volatility can too. But it is hard to argue that out-of-the-money EUR puts are a uniquely cheap way of playing for this outcome.”
This content has been provided under specific arrangement with eFXnews.
Key Quotes
“It is probably not true that the EUR has ignored Greek risks. Without needing to price in this issue, EUR would likely have lower implied volatility, less skew in favor of EUR puts and arguably a higher spot price. EURUSD might be challenging the top of its recent roughly 1.0450 – 1.1050 range rather than languishing near the middle.”
“Market participants who think Greek risks can subside within three months should be looking at the possibility of a meaningful EUR pop higher over that time frame.”
“Market participants who like us think the underlying trend in EUR is lower across the board due to negative euro area core rates – but also think Greek risks can diminish in the next three months – should look to exploit the skew surface by buying EUR put spreads or EUR puts with reverse knock outs (RKOs). We have introduced both varieties into our trade idea portfolios in the past two weeks.”
“Market players looking for a default outcome in Greece in the next three months should be aware that to some extent this is already in the price. Of course both implied volatility and skew in EUR can rise further, much as Greek bond yields and European equities implied volatility can too. But it is hard to argue that out-of-the-money EUR puts are a uniquely cheap way of playing for this outcome.”
This content has been provided under specific arrangement with eFXnews.