Implied NOK vols trade lower on the back of Friday's relief rally on risk. As argued in Reading the Markets Norway , we maintain a bullish view on the NOK. In FX options we like to pursue this view via bearish EUR/NOK risk reversals (3-6M tenors).
EUR/SEK vol. remains elevated (and expensive at the 3M (NYSE:MMM) tenor) despite signs of declining realised vol. and Friday's rebound in risk appetite. Indeed this week's Riksbank minutes and next week's CPI prints represent short-term risks. However, given that the Riksbank pricing has already come down quite a bit, we see value from a risk/reward perspective in selling 3M EUR/SEK straddle. We prefer to skew the straddle on the upside with a strike around 10.30.
