A EUR900 million trade rocked the London options markets this morning.
The two- week put on the euro against the U.S. dollar stood out as options trading in EUR/USD has been quiet this year due to the range-bound nature of spot, according to traders in London.
The put was struck at USD1.2800 when volatility was at 9.8%. One senior trader in London noted that recent concerns over the stability of Cyprus have now fuelled activity.
*Term Structure*
*EUR/USD* *Fwd Rate* *Fwd Pips* *ATM Vol* *25d RR* *25d Bfly*
Spot: 1.2927/28
1W 1.29276/88 0.7/0.10 10.025 -0.95 0.15
1M 1.29298/311 3/3.2 8.975 -1.2 0.15
2M 1.29330/41 6.1/6.3 8.95 -1.35 0.2
3M 1.29359/70 9/9.2 8.95 -1.45 0.2
6M 1.29457/73 18.8/19.4 9.05 -1.6 0.25
9M 1.29570/88 30.1/30.9 9.239 -1.65 0.3
1Y 1.29679/724 41.1/44.6 9.35 -1.7 0.3
/Source: SuperDerivatives SGX/
Strategists at Credit Suisse noted that EUR/USD is likely to remain sensitive to Cyprus in the near-term. “We remain of the view that the likelihood of a systemic outcome is low, and as such maintain a medium-term bullish view on the euro.”
Martyn Harrison, fx options sales/trader at Marex Spectron in London told /DI/ EUR/USD one-year cross-currency basis swaps have rebounded from -28.9 basis points to -25 basis points following the large moves over the last couple of days.
“We see dips to 1.2806 technical support as a potential buying opportunity,” wrote fx strategists at BNP Paribas in a report. They noted that the currency pair still face significant headline risks, but
appear relatively cheap relative to the euro periphery-core bond yield spreads.
Two-week realized volatility on EUR/USD sat at 7.5% during London afternoon trading, while two-week implied was 9.3%. EUR/USD spot was USD1.2915 at press time.
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After
the Fed meeting and the Cyprus fiasco, today the Godfather of
newsletter writers, Richard Russell, came out and said the gold
belonging to the United States may be missing, and that gold-haters are
about to pay. He also discussed Bernanke, stocks, the Fed and more.
Below is what Russell had to say to subscribers:
The
current investment market for junior gold companies is arguably one of
the worst since the United States went off the Gold Standard in 1971.
Dear friends and clients of AFE,
Yesterday Jim Sinclair spent over 5 hours in a question and answer session in New York City. He covered the implications of Cyprus proposing to confiscate as much as 10% of depositor wealth directly from bank accounts, as well as his views on a wide variety of subjects related to gold.
Mr. Sinclair is a 50 year veteran of the gold markets, and one of the most respected voices in the gold community. While we do not always agree 100% with Mr. Sinclair’s views, my personal observation is that he is genuinely concerned for the well-being of others when it comes to wealth preservation through gold.
What follows is a summary of what Mr. Sinclair had to say on these issues. Please bear in mind that this is being re-constructed from hand notes. If a phrase appears in quotes, it is verbatim, otherwise I am paraphrasing.
*****
According to Jim Sinclair:
The announcements that Cyprus put forward a proposal to force depositors to pay for bank bailouts directly has created a global uproar, and the backlash will have a substantial effect on the gold market. Sinclair considers this a major turning point in the gold market, and herald’s gold’s next major up leg.
Sinclair’s comments on various gold related subjects:
There are three phases left in this bull market. Now-2014, 2015-2017, 2018-2021
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