I don't play that spread. Can't be much
payoff in it,given the vol. Since the volume is in the
OTC Interbank, is the bid/asked a concern?
Anyway, you generally get what you pay
for in options, and being short options
works until it doesn't, at which time you'll
probably wish you'd never done it.
For example, LTCM book was largely based on "convergence plays", which is also a strategy that worked until it didn't. Same with Neiderhoffer, who was short equity options, and Askins, who was short the MBS prepayment options. These guys were trying to find a "low-risk" spread
trades where the odds were in their favor. (Just like
most people in the stock market are now, but their
spread is against the risk-free rate.) JMHO.
BTW, if you have a natural exposure to the DEM/CHF, the
play may make an interesting trading ax. Unfortunately,
those are the guys one is usually trading against. |
