BUZZ-COMMENT-FX options reflect the gravity of GBP's vulnerability
Jan 9 (Reuters) - Massive demand and volumes for GBP-related FX options over the last 24 hours are a reflection of GBP losses and the gravity of the situation in which it finds itself.
Implied volatility gauges actual/realised volatility expectations and is a key part of an option premium. GBP/USD implied volatility has surged to new 2-year highs across its entire 1-12-month expiry term structure. The benchmark 1-month expiry implied volatility jumping another 1.0 to test 11.0 in early London Thursday - a massive 2.5 increase in just 24 hours.
GBP put demand - options giving the right to sell GBP, has also surged as shown by risk reversal contracts. In the last 24 hours, the GBP put over GBP call implied volatility premium has tripled to 1.5 in the benchmark 1-month expiry 25 delta contract and is significantly higher across the entire term structure.
DTCC traded options data shows that volumes of GBP related options over the last 24 hours are close to those achieved when GBP hit a record low after the infamous Truss budget in 2022. DTCC data also shows traders buying an array of GBP put strikes between 1.2000 and 1.1500, which would cover the risk of GBP plummeting toward those levels and taking option implied volatility ever higher.
Additional near term risks for GBP/USD are a speech by the Deputy Bank of England Governor late Thursday and Friday's NFP data, which have doubled the price of overnight expiry volatility premiums.
For more click on FXBUZ
(Richard Pace is a Reuters market analyst. The views expressed are his own)
((Richard.Pace@thomsonreuters.com))
Related Articles
BHP’s 2025 Playbook: Turning Profit Dips into Strategic Wins
TradingKey - On August 18, 2025, BHP Group announced its full-year results for the 2025 fiscal year. Despite an 8% year-on-year revenue decline to $51.3 billion and a 26% significant drop in underlying attributable profit, which reflects core business performance, to $10.2 billion
U.S. Stock Market Risk Assessment: Learning from History, Mid-Term Outlook Remains Secure
We argue that the Federal Reserve’s monetary policy is the most critical factor influencing the stock market.
Don't Miss Walmart's Aug 21 Earnings: $0.73 EPS Forecast, Grocery + E-Com Dual Engines – Unlimited Upside Potential?
TradingKey - Walmart's stock price has shown an overall fluctuating upward trend since the release of its first-quarter earnings report, benefiting from investors' favoritism towards Walmart as a defensive stock, as well as expectations for its stable growth in e-commerce and grocery businesses.
Powell's Jackson Hole Speech: For U.S. Stocks, Hawk or Dove Signal Could Be a Lose-Lose?
TradingKey - As U.S. inflation and labor market data show signs of rebalancing, Treasury traders and Wall Street banks have largely priced in a rate cut at the September FOMC meeting — the first of 2025. Yet both a more dovish-than-expected tone and a potential surprise hawkish signal from Fed Chair
Eurozone Q2 GDP Commentary: Will the Euro's Upward Momentum Persist?
TradingKey - On 14 August 2025, Eurostat published Q2 GDP figures, revealing a drop in the Eurozone's quarter-on-quarter growth from 0.6% in the first quarter to 0.1%. Consequently, annual growth eased from 1.5% to 1.4%. The slowdown primarily stems from the diminishing boost from European...
