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Blowout Tuesday Session for Options Persists Across Asia-Pac

OPTIONS
  • The Tuesday session was a blowout for currency hedging volumes, with the DTCC tracking over $120bln in total notional traded for comfortably the busiest session in over three months. The high frequency of options trades persisted across Asia-Pac, with KRW, EUR/USD and EUR/CNY trades particular hotspots of activity.
  • KRW outperformance overnight has helped stimulate demand for KRW options, with notional traded so far today over three times the average for this time of day. Vol hedging appears to be the dominant theme across Asia hours rather than a specific directional play, with trades consistent with a series of strangles coinciding with the KRW spot rally. The front-end of the implied vol curve saw support, with 1m trading at 9.5 points, the highest since late August.
  • Yesterday’s sharp rally in EUR/USD post-US CPI helped stimulate demand for upside protection in early Europe, with a series of strikes expiring on Dec14 (thereby capturing the December Fed and ECB rate decisions) that appear to target the pair holding in a range of 1.0670 – 1.0980 via a 1.0925/1.1025 call spread, likely selling 1.0725 puts to fund the position.

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