25Delta FX Dynamic Virtual Program for MV Credit • Strategy #4
Notional Exposed: Usd 150MM
Benchmark: 100% hedged
Spot at inception: 1.1016
Expiry: Dec 20th 2019
Forward rate at inception:1.1029
Cost of forward: 0.12% monthly
Sell EUR Call USD 150MM at K=1.1125, Vol 4%, Premium: Eur 111k
Sell EUR Put USD 150MM at K= 1.0925,Vol 4%, Premium: Eur 84k
Sell Usd 150MM at Fwd rate 1.1029
Premium from options: 0.145% or Eur 195k
The strategy will deliver positive return against the benchmark (better settlement results) at maturity, if Spot rate terminates between 1.1125 & 1.0925.
Market Situation and events ahead:
As for the market and possible events that may affect we believe that it is a month of greater volatility than November, in which there are hardly any market events or strong movements in currencies, there will be ECB this month although we also do not expect Lagarde to do something unexpected , there will also be FED, no rate drops expected to be 95% and there are also elections in the UK although everything seems quite done for Johnson and the Conservatives.
In conclusion comes a month a little more hectic than the one of November but without great movements.
We will follow markets to see any potential oportunity araising before or after the different upcoming market events, should the expectations suffer a mayor deviation from current consensus.