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Nov 10 - 06:55 AM

GBP/USD - Warning Signs For GBP/USD From The FX Options Market

By Richard Pace  —  Nov 10 - 04:36 AM
  • Forward looking FX options show a growing premium for GBP puts vs calls

  • That's the option to sell GBP vs buy it - shown by risk reversal contracts

  • 3-month 25 delta risk reversals trade at 1.15 premium GBP puts over calls

  • This premium was already post Brexit high at 1.0 when spot reached 1.38

  • That warned of GBP/USD setback risk, which very quickly came to fruition

  • Gains to 1.15 GBP puts shows options remain very wary of more GBP weakness

  • Potential draw from big strike expiries Wednesday nL1N2S10FR



For more click on FXBUZ


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

Source:
Refinitiv IFR Research/Market Commentary

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