USD/ZAR risk reversals hit 2.5-month low as call demand weakens

Omkar Godbole FXStreet Contributor

One-month risk reversal on USD/ZAR, a gauge of calls to puts, fell to 2.65 on Monday to hit the lowest level since March 9, having topped out at 5.425 in early April.

The decline to multi-month lows is reflective of the weakening of demand for call options on USD/ZAR.

A call option is a derivative contract, which gives the holder the right but not the obligation to buy the underlying asset at a predetermined rate on or before a specified date. It is essentially a bullish bet on the underlying asset. Meanwhile, a put option represents a right to sell.

The data validates South African Rand's two-month uptrend. The currency bottomed out at 19.339 per US dollar in early April and was last seen changing hands at 17.55 per dollar.

Risk reversals

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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