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OPTIONS: Hedging Markets Favour GBP, CNY Upside Tuesday

OPTIONS
  • While FX options volumes are muted so far Tuesday, GBP markets are seeing some signs of life, with GBP/USD notional traded ahead of average for this time of day. Trades seemingly targeting the post-election fallout and the Aug1 BoE decision are helping prop activity. 
  • Trades consistent with sizeable vol hedges crossed mid-morning, covering 1.2550 and 1.2650 straddles (expiring mid-Aug and mid-Oct respectively). Nonetheless, overall options trade has passed with an upside bias, evident in today's put/call ratio of ~0.78 and noted demand for call strikes as high as 1.2750.
  • USD/CNY has also been a pair in focus Tuesday, with downside exposure well in demand despite the pair's recent upside and the USD strength posted since the beginning of the week.
  • Just over $3 in puts have traded for every $2 in calls so far today, with put strikes layered between 7.2000-7.1750 making up a decent portion of the volume, as well as ITM puts at 7.2900. Trades generally shorter-dated, but the 7.18 puts standout as they expire on Jul 25th - a week after the conclusion of China's Third Plenum meetings on Jul 15 - 18. 

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