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TWD, CNY Spot Breakouts Stimulate Solid Hedging Demand

OPTIONS
  • FX options volumes were unusually busy for a Monday session, with total notional traded via the DTCC topping $100bln for a second consecutive session. The demand for options coincides with uptick in front-end G10 vols, with CNY, JPY, AUD and NZD 1m vols touching new multi-week highs in Tuesday trade. The exception here is EUR and GBP vols, which remain subdued and close to recent lows.
  • Today’s activity has been propped by sizeable trade across TWD options, likely triggered by the sharp multi-day rally in TWD over the past week or so. USD/TWD spot slipped below 31.50 for the first time since early August overnight, helping trigger a wave of vol-hedging evident in several sizeable strangle trades across late Asia/early Europe hours.
  • The strengthening of spot CNY above the daily fix has also been accompanied by higher-than-average CNY options volumes, with downside exposure in demand throughout. Close to $3 in USD/CNY puts have traded for every $2 in calls, with 7.12, 7.10 and 7.05 put strikes seeing the most notable interest.
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