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Downside Protection the Theme in Options as Spot Slides

GBP
  • Very healthy volumes across both GBP futures and options on today's weakness in the currency.
  • Across DTCC-tracked trade, downside protection is the theme, with over $2 trading in vanilla put notional for every $1 in calls. Sizeable downside strikes include 1.3625, but also decent interest in OTM 1.34 and even 1.31 puts.
  • The more sizeable trades in options space are consistent with legs of a large put spread targeting an end-November (two-month) expiry and breaks even on a move below ~1.3350 in GBP/USD spot. Trades captures next BoE meeting (Nov4) as well as prelim November PMIs just ahead of expiry (Nov23).
  • Reflecting the solid interest in GBP today, futures volumes are well ahead of average for this point in the trading day, with total traded around 50% ahead of a regular session. Particularly sizeable volumes crossed at 1154BST just ahead of the session low at 1.3594.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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