FX Invest: Volatility trading comes up trumps in June

Currency managers going short volatility would have come out top in June, indicates research from the Royal Bank of Scotland (RBS).

The bank’s naive simulations of currency strategies revealed the short-volatility strategy was the top performer in the month, generating returns of 3.4%. Short-volatility positions on the euro, Swiss franc, Swedish krona and Norwegian krone put on at the end of May all gained. However, there were no positions at the end of June as the implied volatilities of all currencies were below their one-year averages, the bank said.

The biggest loser was the trend strategy simulation, with –3.7% in losses from positions in the euro, sterling, Australian dollar and Norwegian krone suffering from whipsaw. The Norwegian krone was the biggest loser among them. Only the Swiss franc held on to a long position throughout the month and subsequently was the biggest gainer.