USD/CHF options burn banks amid illiquid markets

Options portfolios were impossible to delta hedge, traders say

Shock surge: Swiss franc rose 38% in 20 minutes

Bank losses from January's shock Swiss franc move were probably the result of the companies being unable to delta hedge USD/CHF options books, according to traders and risk managers at four dealers.

In a matter of 20 minutes, the exchange rate of EUR/CHF dropped 30%, from 1.20 to 0.85, as liquidity evaporated and traders scrambled to get out of billions of dollars of long EUR/CHF bets.

The liquidiation of the one-way market made it impossible for USD/CHF options traders to delta hedge

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