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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
OPTIONS
- Currency option volumes rebounded on Tuesday after Monday's US public holiday, with close to $100bln cumulative notional crossing via the DTCC - ahead of the norm for a single session, but more inline when averaged out over the quiet Monday.
- Activity so far Wednesday is more muted, with GBP/USD hedging activity among the few hotspots of G10 options trade thanks to a series of sizeable put spreads crossing just ahead of the NY crossover. The trades are consistent with a 1.2560/1.2465 one-month put spread rolling off on March 21st - the trade breaks even on GBP/USD weakness below 1.2528 and captures the February CPI report due on March 20th. The trade looks likely partially financed by the sale of a deep OTM 1.1765 put rolling off in August.
- The trades could be taking advantage of historically cheap hedging premiums, with 1m GBP/USD vols just above 6 points and close to multi-year lows. The 6m contract is close to post-pandemic lows - this leaves an ATM GBP/USD straddle costing ~150 GBP pips and implying a +/- 450 pip swing out to August - thereby respecting the H2 2023 range in the pair.
Figure 1: GBP/USD 10d 6m butterfly vols hold close to post-pandemic lows
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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