Repeats with no changes

Societe Generale advocates an option trade that would benefit from USD/CHF gains, with their rationale being that CHF does not reflect dovish SNB pricing.

The biggest central bank repricing over the last month was by Switzerland, with the Swiss interest rate for December seen 25bps lower than it was a month ago - a bigger dovish repricing than for U.S. rates.
Meanwhile, the CHF gained more than 1% versus USD over this period as the market unwound short CHF carry trades.
In this context, Societe Generale say that in their view, the relative strength of CHF does not yet reflect either the significant dovish SNB pricing or market expectations.

Switzerland's Q2 GDP growth delivered a positive surprise this week, but August headline (and core) CPI printed at only 1.1%, fuelling dovish expectations.
The market remains essentially driven by rates, and USD/CHF is indeed tracking its short rates differential.
The latter is bottoming out at the same level as in January, when a bounce was followed by a multi-month USD/CHF uptrend.
Societe Generale therefore now see greater USD/CHF upside risk.

The bank notes that USD/CHF realised volatility has risen faster than implied volatility, which creates a negative volatility risk premium that cheapens USD/CHF options.
At the same time the volatility premium for CHF calls over puts increased as the USD depreciated and the CHF gained, so there is a discount for topside USDCHF strikes, too.

Societe Generale suggests a 2-month expiry 0.8730 CHF put/USD call strike with an indicative offer of 0.25% with USD/CHF spot at 0.8500.
The strike is set at the mid August peak and assumes a move toward and beyond this level.
If the USD/CHF fails to rise, the maximum loss is the premium paid.

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