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Dec 07 - 05:55 AM

USD/CAD - Options Flash BoC Volatility Warning

By Richard Pace  —  Dec 07 - 03:55 AM
  • Bank of Canada expected to lift rates by another 0.5% at 15.00GMT Wednesday

  • Because demand and Inflation still hot. Decision followed by policy guidance

  • BoC now captured by overnight expiry options to flag high volatility premium

  • Overnight expiry USD/CAD implied volatility 11.5 to 16.0 since BoC capture

  • Premium/break-even for straddle from 66 to 91 C$ pips in either direction

  • Volatility buyers can profit if actual volatility outperforms implied

  • Broader 1-week options flash U.S. CPI warnings


For more click on FXBUZ


Source:
Refinitiv IFR Research/Market Commentary

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