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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.
OPTIONS
- The Tuesday session saw the highest daily DTCC-tracked options notional traded since Dec14 (day following the December Fed decision), and the second highest options volumes in over 3 months. Trade was dominated by outsized interest in CNY and TWD hedges relative to recent norms, however all major pairs saw higher-than-average activity across the session. Today’s session so far looks no different, with Asia-Pac hours seeing solid demand for USD/JPY and USD/HKD options.
- One-week USD/JPY vols stepped up yesterday as the contract captured the Jan23 BoJ rate decision. Implied vols are now clear of 10.5 points and, while lower than the vol premium added for the December and October meetings, still signal elevated risk headed into the event.
- Markets have been favouring USD/JPY topside exposure overnight, with over $2 in calls trading for every $1 in puts, reflecting the greenback rally and fresh YTD highs in the USD Index overnight. Call strikes north of Y150.00 have drawn focus (over $1bln notional traded with strikes Y150.00-50 across Asia hours), with not insignificant demand for OTM longer-dated strikes as high as Y161.00.
- Elsewhere, trade across USD/HKD options picked up well during the local session, with downside hedges the dominant theme. 7.79 and 7.76 put strikes traded well, but the most eye-catching structure were trades consistent with a large 7.80/7.85 call spread rolling off in mid-March of this year. The trade breaks-even with spot above ~7.8195 and positions for the pair to re-test the upper-end of the 7.75-7.85 trading band in the coming months, or for a material pick-up in implied vol.
Figure 1: FX options notional traded - Source: MNI/DTCC
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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