The EURCHF OTC FX options market appears to be bland in the non-directional trend over the 1w to 3m time horizon as the hedgers have not been showing any interest in this period and as a result delta risk reversal for EURCHF has also been bearish-neutral.
From the nutshell, IVs of this pair has been the least among G10 currency space, lower IVs of ATM contracts have been the good news for option writers
The options with a higher IV cost more. This is intuitive due to the higher likelihood of the market ‘swinging’ in your favour. If IV increases and you are holding an option, this is good. But fortunately, if you are short on an option, it is conducive such lower IV times. An option writer wishes IV to shrink away so the premium falls. You should also note short-dated options are less sensitive to IV, while long-dated are more sensitive.
Option-trade recommendation: Naked Strangle Sale
At current spot at 1.0887 with range bounded trend keeping in consideration, we would like to remain in the safe zone by achieving certain returns though shorting a strangle.
Short 1W OTM put (1% strike difference referring lower cap)and short OTM call simultaneously of the same expiry (1.5% strike referring upper cap) (preferably short term for maturity is desired).
Maximum returns for the short strangle is achieved when the EUR/CHF price on expiry is trading between the OTM strikes as both the instruments have to wipe off worthless. So that the options trader gets to keep the entire initial credit taken as profit.


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