Société Générale Touts Aussie Dollar Risk Reversal

Derivatives Week

–Rob McGlinchey

Strategists at Société Générale are recommending a risk reversal trade to take advantage of their view that the Australian dollar could strengthen against the U.S. dollar in the next six months, but decline again over the long term.

With spot at USD0.906, SocGen recommends investors buy a six-month European call option on the pair, with an out-of-the-money strike of USD0.92. To fund the call, the firm recommends investors sell a reverse knock-out put with an out-of-the-money barrier of USD0.