### POV: OPTIONS MARKETS FAVOUR A STRONGER......>

NOK: ### POV: OPTIONS MARKETS FAVOUR A STRONGER NOK OVER THE SHORT-, MEDIUM-TERM

-Unsurprisingly, the NOK implied vol curve has ebbed higher for tenors covering

the Norges Bank rate decision. 1-week implied vols today touched the highest

since early March as markets look ahead to an expected 25bps rate hike. Despite

this, hedging costs remain cheap relative to recent history, prompting options

markets to gear for NOK strength in the short-term.

-Options trade data collated over the past month sees strong demand for put

strikes at 9.60, 9.50 and as low as 9.45. With a put/call ratio of 1.67, markets

are clearly gearing to profit for a move through the August lows of Nok9.4913.

The EUR/NOK risk reversals curve further cements this, which has shifted lower

for all tenors out to three years over the past week. The one month contract

comfortably sits near the lowest in 18 months.

-These trades have been supported by the still relatively low cost of hedging (a

vanilla 3m EUR/NOK put with a 9.45 strike costs ~8 EUR pips at writing), but

this could rise post-rate decision should the Norges Bank sharply alter their

rate projections.