USD/CHF risk reversals: CHF bullish bias strongest since Q1, 2018

Risk reversals on Swiss Franc (CHF), the gauge of calls to puts, fell to 15-month lows on Wednesday, indicating the investors are adding bets to position for further strength in Switzerland's currency. 

USD/CHF one-month 25 delta risk reversals traded at -1.25 yesterday, the lowest level since March 2018. The negative print indicates the implied volatility premium for CHF calls (or USD/CHF puts) is higher than that for CHF puts (or USD/CHF calls). 

A call option gives the holder (buyer) the right (but not the obligation) to buy a specified quantity of an underlying asset at a specified price within a fixed period of time. Essentially, call options represent bullish bets and put options represent bearish bets. 

The USD/CHF pair is inching closer to 0.98 at press time, having scored gains in the previous two months. However, the rising demand for CHF calls (USD/CHF puts), as shown by risk reversals, indicates the relief rally could be short-lived. 

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