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Nov 19 - 08:55 AM

GBP/USD - Massive GBP/USD FX Option Trade Flow - No Deal Hedge?

By Richard Pace  —  Nov 19 - 07:05 AM
  • DTCC reported option data shows a very big GBP/USD option trade flow

  • 28 Dec expiry, 1.2500 GBP put/USD call, trades more than GBP 500-million

  • Implied volatility would have been low-mid 12's - premium around 18 GBP pips

  • Looks to have been a buying interest - potentially hedging no deal Brexit

  • Market optimistic, but time is running out, no deal remains tail risk

  • Option risk reversals retain a high premium for GBP puts versus calls

  • Benchmark 1-month risk reversals regain 0.9 from 0.7 - taking no chances

  • Even with a deal - GBP's upside appears limited nL1N2I50L7



1-3-12-month GBP/USD risk reversals Click here

Source:
Refinitiv IFR Research/Market Commentary

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