Trading GBPUSD via FX Option Strategies Trading GBPUSD via FX Option Strategies Trading GBPUSD via FX Option Strategies

Trading GBPUSD via FX Option Strategies

Options 10 minutes to read
Hay Thi

Market Specialist

Background

Following weaker-than-expected U.S. jobs data on 3 May, the sterling has strengthened against the dollar as it signalled a cooling labour market. This fueled the expectations that the wage growth and inflation would slow to allow the Fed to cut rates later this year. The higher-than-expected US jobless claims data on 9 May further supported the signs of a slowing labour market. However,  GBPUSD dipped to a 2-week low of 1.2445 after the Bank of England decided to keep its rates unchanged at 5.25% during its policy meeting last week. The sterling has since rebounded to 1.255 and remained steady as investors await the U.K labour market report due on Tuesday and the release of US CPI on Wednesday.

Our Head of FX Strategy thinks:

GBPUSD has withstood the clearest signal on rate cuts yet boldly, given it comes from the disinflation narrative catching fire rather than any growth concerns. UK's resilient Q1 GDP, political stability and equity gains have fueled fresh optimism, which is unlikely to be deterred by central bank's rate cuts.

Option inspiration for GBPUSD bears

Buy Put/Sell Call for 45 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 45 days (27-June-2024)
  • Premium for Sell Call at 1.2695: 0.00548
  • Premium for Buy Put at 1.2380: 0.00548
  • Net cost ~ 0

Buy Put/Sell Put/Sell Call for 45 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 45 days (27-June-2024)
  • Premium for Buy Put at 1.2555 : 0.01145
  • Premium for Sell Put at 1.2375 : 0.00466
  • Premium for Sell Call at 1.2655 0.00679
  • Net cost ~ 0 

Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 45 days for a notional value of GBP 100k

Sell_45

Buy Put/Sell Call for 90 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 45 days (27-June-2024)
  • Premium for Sell Call at 1.2720: 0.02146
  • Premium for Buy Put at 1.2395: 0.02146
  • Net cost ~ 0

Buy Put/Sell Put/Sell Call for 90 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 90 days (12-Aug-2024)
  • Premium for Buy Put at 1.255 : 0.01591
  • Premium for Sell Put at 1.2265 : 0.00588
  • Premium for Sell Call at 1.27: 0.001003
  • Net cost ~ 0

Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 90 days for a notional value of GBP 100k

Sell_90

Options inspiration for GBPUSD bulls

Buy Call/Sell Put for 45 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 45 days (27-June-2024)
  • Premium for Buy Call at 1.2695: 0.00622
  • Premium for Sell Put at 1.2435: 0.00622
  • Net cost ~ 0

Buy Call/Sell Call/Sell Put for 45 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 45 days (27-June-2024)
  • Premium for Buy Call at 1.255: 0.01187
  • Premium for Sell Call at 1.2670: 0.00602
  • Premium for Sell Put at 1.2415: 0.00585
  • Net cost ~ 0

Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 45 days for a notional value of GBP 100k

Buy_45_v4

Buy Call/Sell Put for 90 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 90 days (12-Aug-2024)
  • Premium for Buy Call at 1.2685: 0.0101
  • Premium for Sell Put at 1.240: 0.0101
  • Net cost ~ 0

Buy Call/Sell Call/Sell Put for 90 days

  • Spot Reference: 1.255
  • Notional value: 100,000
  • Expiry date: 90 days (12-Aug-2024)
  • Premium for Buy Call at 1.255: 0.01550
  • Premium for Sell Call at 1.2725: 0.00753
  • Premium for Sell Put at 1.2315: 0.00797
  • Net cost ~ 0

Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 90 days for a notional value of GBP 100k

Buy_90_v2

Important disclaimer: The impact of swaps is not taken into consideration in the scenario above. The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and consider their unique financial situation, risk tolerance, and investment objectives before making any decisions. 

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