We spot out the massive drops in 1w-3m IVs, 13.2% in 1w expiries and 9% in 3m tenors, while risk reversals favor bulls in Swiss franc for which SNB is unhappy with.

Since the minimum exchange rate in EURCHF was abolished interventions have become part of the SNB’s everyday repertoire.

The way we like to yield the advantage by trading implied volatility is through iron condors.

With this trade, you are selling an OTM Call and an OTM Put and buying a Call further out on the upside and buying a put further out on the downside.

Let’s look at the instance shown in the diagram and ponder over where we place the following trades today gauging IV shifts.

To execute an iron butterfly, as shown in the diagram the options trader can initiate a lower strike OTM put, sells a middle strike an ATM put, sells a middle strike at-the-money call and buys another higher strike OTM call, this results in a net credit to put on the trade.

The iron butterfly spread is a limited risk, limited profit trading strategy that is structured for a larger probability of earning a smaller limited profit when the underlying spot FX is perceived to have a low volatility. 

The sensitivity tool also consists of the payoff diagram for the trade mentioned above straight after it was placed. Notice how we are short vega of 41.45. This would imply that the net position will benefit from a fall in implied vols.

Please be noted that the tenors, strikes, and instruments shown in the diagram are just for demonstration purpose only, use appropriate inputs as suitable to your trading profile.