Dealers report that banks are peddling range-trading strategies to one another. One that is growing in popularity is a range accrual option: a double-no-touch-option that pays back your premium after a portion of the term expires. We heard of a 1.37/1.43 making the rounds that pays back your premium in something like 8 or 9 days on a one-month term.
If everyone piles in, looking for a free lunch, odds are that lunch will be taken away pretty quick. That is not to say markets will begin a new trend, but there will be tremendous incentive to push it just beyond either end of 1.37/1.43…
