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Markets Favour JPY Calls, GBP Puts Amid Bond Volatility

OPTIONS
  • Reflecting the volatility in bond, equity and commodity markets in recent sessions, demand for FX options has been notable this week, with heightened CAD, JPY and GBP hedging activity evident throughout.
  • Infitting with the risk-off tone, demand for USD/JPY options has been solid, with notional wagered against puts countering that of calls.
  • Y108.15, Y108.00 and Y107.10 put strikes have been a popular trade and front-end implied vols have climbed suitably to match the increased volatility over the past two sessions.
  • A similar impact on GBP, with the front end of the vol curve creeping higher to touch the best levels of the month. Decent interest in 1.3575 puts (roughly matching today's low) has been noted, with over $300mln notional wagered against that strike. Downside bias also reflected in 1m risk reversals, with the contract ebbing to 0.55 in favour of puts, the lowest since April.
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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