The Swiss National Bank (SNB) might be using currency options to underline its efforts of capping the franc at 1.20 per euro, Reuters reports. It may be offloading options, or selling implied volatility, to help reinforce the 1.20 target.
Using derivatives will enable the Swiss central bank to leverage its balance sheet and give it more firepower. Acting directly in the currency options market will allow it to make a profit if volatility stays low.
Click here for the story from Reuters.