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May 21 - 04:55 AM

GBP/USD - Cheap KO Options Benefit As GBP/USD Gains, And Still Can

By Richard Pace  —  May 21 - 02:41 AM
  • GBP call options benefit from GBP/USD gains, increase in value

  • Premiums can be significantly reduced with knock out trigger above strike

  • Example earlier this week - 1-month 1.4100 GBP call with a 1.45 knock out

  • At $44-pips, cost less than half premium of outright GBP call nL1N2N10MM

  • Premiums up with GBP, but KO option now 3+ times cheaper than 1.41 GBP call

  • 1-month 1.41 now 174 pips, but add a 1.4500 KO barrier and it's $50-pips

  • Allows holder to buy GBP/USD at 1.4100 at expiry, only if 1.45 didn't trade

  • Maturity, strike, and KO trigger can be adjusted to suit outlook

For more click on FXBUZ


GBP/USD 1-month 1.4100 KO 1.45 price Click here

Source:
Refinitiv IFR Research/Market Commentary

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