BUZZ-COMMENT-Soc-Gen advocates this GBP/USD option trade

Reuters2024-01-31

Jan 31 (Reuters) - FX option traders at Societe Generale favour buying volatility in GBP/USD with the rationale that it's more likely to revert higher.

They cite 3-month GBP/USD implied volatility trading at the lower bound of a 7.0-8.0 range that has been in place since early November, with 7.0 also being a 2-year low. During the same period, short term realised volatility has collapsed as GBP/USD clings to a 1.26-1.28 range for the last 6 weeks, so the probability of a GBP/USD break either way is now considerably high, in their opinion.

Societe Generale favour buying a 3-month at-the-money straddle near 7.0 as a directional, rather than a volatility trade, so without an attached delta (cash) hedge. The trade would suit a sooner, rather than later break of the 1.2600-1.2800 range, which would hopefully offset any time decay losses and return a profit. The maximum loss could never be more than the premium paid for the option.

Could the impending U.S. or UK policy decisions prove to be the catalyst for a GBP/USD break-out?

For more click on

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 1-month GBP/USD realised volatility GBP/USD 3-month FXO implied volatility

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

(Richard Pace is a Reuters market analyst. The views expressed are his own)

((Richard.Pace@thomsonreuters.com))

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During the same period, short term realised volatility has collapsed as GBP/USD clings to a 1.26-1.28 range for the last 6 weeks, so the probability of a GBP/USD break either way is now considerably high, in their opinion. </p><p>   <a href=\"https://laohu8.com/S/SCGLY\">Societe Generale</a> favour buying a 3-month at-the-money straddle near 7.0 as a directional, rather than a volatility trade, so without an attached delta (cash) hedge. The trade would suit a sooner, rather than later break of the 1.2600-1.2800 range, which would hopefully offset any time decay losses and return a profit. 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During the same period, short term realised volatility has collapsed as GBP/USD clings to a 1.26-1.28 range for the last 6 weeks, so the probability of a GBP/USD break either way is now considerably high, in their opinion. </p><p>   <a href=\"https://laohu8.com/S/SCGLY\">Societe Generale</a> favour buying a 3-month at-the-money straddle near 7.0 as a directional, rather than a volatility trade, so without an attached delta (cash) hedge. The trade would suit a sooner, rather than later break of the 1.2600-1.2800 range, which would hopefully offset any time decay losses and return a profit. The maximum loss could never be more than the premium paid for the option. </p><p>   Could the impending U.S. or UK policy decisions prove to be the catalyst for a GBP/USD break-out?  </p><p>   For more click on   </p><p>    &lt;^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 1-month GBP/USD realised volatility     GBP/USD 3-month FXO implied volatility    </p><p>   ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^&gt;</p><p>(Richard Pace is a Reuters market analyst. 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For more click on       <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 1-month GBP/USD realised volatility     GBP/USD 3-month FXO implied volatility       ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>(Richard Pace is a Reuters market analyst. 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