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J.P.Morgan: Sell 1-Year Single-Look Straddles On 2s/10s Swap Curve, Delta Hedged

US SWAPTIONS

J.P.Morgan note that “curve volatility appears rich in some sectors of the YCSO market. One noteworthy feature of recent market moves is that although rates have been quite volatile, they have moved mostly in parallel fashion, resulting in lower realised curve volatility. On the other hand, implied curve volatility has remained elevated, and has been much higher than realised volatility for some time. Therefore, we recommend selling 1Y expiry single-look straddles on the 2s/10s swap curve delta hedged on a daily basis.”

  • This trade assumes daily delta hedging calculated using Normal deltas.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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