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Goldman Recommends S&P 500 Puts - We like AUDUSD Shorts

Goldman Recommends S&P 500 Puts - We like AUDUSD Shorts

2012-09-05 16:00:00
David Rodriguez, Head of Product
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Correlation between Australian Dollar/US Dollar Exchange Rate and S&P 500 VIX

goldman_recommends_buying_s_and_p_puts_we_like_audusd_body_Picture_1.png, Goldman Recommends S&P 500 Puts - We like AUDUSD Shorts

Australian Dollar/US Dollar Exchange Rate (lhs)

S&P 500 Volatility Index (VIX) (rhs)

Correlation between AUDUSD and S&P 500 Volatility Index

A group of equity market strategists at Goldman Sachs recently issued a report recommending that readers go long Puts on the S&P 500 that expire on September 14—options that give the buyer the option to sell the S&P at a predetermined price. Why? The S&P 500 Volatility Index looks especially low given critical European and US economic event risk through the end of this week warns and a pivotal German vote on September 12.

The recommended trade would do well if the S&P VIX surges and/or the S&P 500 falls before September 14.

How do we trade such big event risk?

Given the strong correlation between stocks, the VIX, and the AUDUSD, we believe that an Australian Dollar-short position would likewise do well in such conditions.

Is now the time to buy Australian Dollar weakness? We see arguments for and against such a trade, but ultimately the results of critical event risk will likely decide the fate of the risk-sensitive AUDUSD.

Forex Correlations Summary

View forex correlations to the S&P 500, S&P Volatility Index (VIX), Crude Oil Futures prices, US 2-Year Treasury Yields, and Spot Gold prices.

S&P 500

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.66

0.90

-0.18

0.71

-0.81

0.50

-0.78

1 Month

-0.09

0.21

0.26

0.29

-0.63

0.26

-0.04

3 Month

0.64

0.66

0.15

0.80

-0.84

0.78

-0.73

1 Year

0.69

0.61

0.02

0.83

-0.85

0.78

-0.74

S&P VIX

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

-0.95

-0.91

0.66

-0.47

0.78

-0.61

0.89

1 Month

0.15

-0.05

0.02

0.11

0.18

-0.08

-0.07

3 Month

-0.44

-0.48

-0.19

-0.65

0.64

-0.69

0.54

1 Year

-0.59

-0.53

-0.04

-0.69

0.68

-0.66

0.63

Crude Oil

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.97

0.85

-0.79

0.62

-0.86

0.80

-0.97

1 Month

0.47

0.43

0.05

0.47

-0.58

0.42

-0.43

3 Month

0.65

0.56

0.12

0.67

-0.79

0.60

-0.68

1 Year

0.46

0.42

0.08

0.59

-0.60

0.54

-0.52

US 2yr Yield

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

-0.69

-0.38

0.82

-0.50

0.66

-0.76

0.71

1 Month

-0.30

-0.36

0.69

-0.15

-0.04

-0.49

0.49

3 Month

0.17

-0.01

0.57

0.13

-0.21

0.05

0.01

1 Year

0.23

0.09

0.14

0.08

-0.22

0.03

-0.10

Gold

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.81

0.58

-0.70

0.74

-0.92

0.83

-0.87

1 Month

0.56

0.51

-0.46

0.50

-0.34

0.73

-0.67

3 Month

0.63

0.52

-0.18

0.58

-0.62

0.58

-0.68

1 Year

0.37

0.30

-0.19

0.44

-0.34

0.46

-0.47

Perfect Positive Correlation:

1.00

Perfect Negative Correlation:

-1.00

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

Meet the DailyFX team in Las Vegas at the annual FXCM Traders Expo, November 2-4, 2012 at the Rio All Suite Hotel & Casino. For additional information regarding the schedule, workshops and accommodations, visit the FXCM Trading Expo website.

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