Foreign-exchange option traders are betting that the won’s rally, which has led Asian currencies since July, still has room to run. On Wednesday, the premium for one-month options benefiting from a stronger won against the dollar narrowed for a third straight day relative to those benefiting from a weaker won, signaling heightened expectations for further won appreciation.
This shift comes as the currency pair extended its decline on Wednesday, following a 1.3% drop in the previous session—the largest single-day fall in a month. The won has climbed more than 14% since July, and the momentum is expected to persist as South Korean chipmakers continue to bring overseas capital back home to expand production, while robust global demand for artificial intelligence and semiconductors fuels economic growth.
These tailwinds have prompted option traders to position for continued gains through year-end. "There's significant interest in strategies that benefit from a weaker dollar-won rate, primarily through put spreads or European knock-out options," said Saurabh Tandon, global head of FX at Standard Chartered in Singapore.
This positioning was evident in two of the largest dollar transactions on September 21, both of which were put spreads. Data from the Depository Trust & Clearing Corporation shows one of these options, expiring on October 21, has strike prices of 1,370 and 1,343. The trade reaches its maximum value if the currency pair is at or below 1,343 on the expiration date.
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