Investors who expect the SNB to raise the EURCHF floor at next month’s meeting should consider selling calendars to take advantage of the disconnect in skew, where 2m and earlier is bid for EUR calls while 3m and out is anchored for EUR puts. With spot at 1.2378, sell a 1y 1.2150-strike EUR put / CHF call versus buying the 3m 1.2450-strike. With spot trading higher on an SNB move, the investor gains from the long front-end strike and the short back-end position also benefits as vega comes off.
UBS Investment Bank