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Nov 02 - 05:55 AM

GBP/USD - More Hedges And Growing Option Premium For GBP/USD Downside

By Richard Pace  —  Nov 02 - 03:38 AM
  • GBP/USD FX option flows show more interest to cover downside, than upside

  • Firmer option implied volatility flags BoE, Fed and downside risk premium

  • The premium for GBP puts over calls (downside vs upside) has grown

  • 1-month option risk reversals contract retests recent 0.8 peak for GBP puts

  • 3-month risk reversal matches March high 1.0, not above since Dec 2020

  • This additional option volatility premium for GBP puts can be beneficial

  • Adding a knock-out trigger to a GBP put makes it significantly cheaper

  • However, the option is knocked-out if trigger touched nL1N2RI0IT

For more click on FXBUZ

1-3-month GBP/USD option risk reversals Click here

Refinitiv IFR Research/Market Commentary


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