16 Jan 2015
Trading GBP options into the general election – SG
FXStreet (Barcelona) - Analysts at Societe Generale, share a directional and volatility trade setup using options for GBP into the general elections.
Key Quotes
“The political uncertainty surrounding the 7 May UK general election is a bigger threat for cable than EUR/GBP. Collapsing inflation raises the risk of a later BoE exit while the plummeting current account deficit is also weighing on sterling."
“Higher cable risk reversals suggest financing directional puts by selling low strikes.”
“Trading a steepening in the risk reversal curve is cheaper than in the ATM vol curve.”
“Directional trade: Buy GBP/USD 4M put spread 1x1.5, strikes 1.5150/1.4750. Indicative offer: 0.55% (spot ref: 1.5190)."
"Volatility trade: Buy GBP/USD 6M risk reversal/Sell 3M risk reversal. Indicative offer 0.7 vols.”
Key Quotes
“The political uncertainty surrounding the 7 May UK general election is a bigger threat for cable than EUR/GBP. Collapsing inflation raises the risk of a later BoE exit while the plummeting current account deficit is also weighing on sterling."
“Higher cable risk reversals suggest financing directional puts by selling low strikes.”
“Trading a steepening in the risk reversal curve is cheaper than in the ATM vol curve.”
“Directional trade: Buy GBP/USD 4M put spread 1x1.5, strikes 1.5150/1.4750. Indicative offer: 0.55% (spot ref: 1.5190)."
"Volatility trade: Buy GBP/USD 6M risk reversal/Sell 3M risk reversal. Indicative offer 0.7 vols.”