• Write for Us
  • Advertise
  • About
  • Contact
Tuesday, October 3, 2023
British Herald
Advertisement
  • Home
  • World
    • UK
    • Europe
    • Asia
    • Africa
    • Oceania
    • USA
    • Middle East
    • Latin America
  • Politics
  • Business
    • ECONOMY
    • Financial Markets
    • Companies
  • Sport
  • Fintech
  • Videos
  • BH Magazine
  • More
    • Health
    • Entertainment
    • Science & Technology
    • Climate & Environment
    • Sustainability
    • Food and Travel
    • Fashion
    • Culture and Lifestyle
    • Articles
    • Opinion
No Result
View All Result
British Herald
  • Home
  • World
    • UK
    • Europe
    • Asia
    • Africa
    • Oceania
    • USA
    • Middle East
    • Latin America
  • Politics
  • Business
    • ECONOMY
    • Financial Markets
    • Companies
  • Sport
  • Fintech
  • Videos
  • BH Magazine
  • More
    • Health
    • Entertainment
    • Science & Technology
    • Climate & Environment
    • Sustainability
    • Food and Travel
    • Fashion
    • Culture and Lifestyle
    • Articles
    • Opinion
No Result
View All Result
British Herald
Home Finance

Sterling slump sparks dash for options to protect investments

Editorial Bureau by Editorial Bureau
November 17, 2018
0
Sterling slump sparks dash for options to protect investments

FILE PHOTO: British five pound banknotes.November 14, 2017. REUTERS/Benoit Tessier/File Photo

74
SHARES
1.2k
VIEWS
Share on FacebookShare on Twitter

LONDON (Reuters) – Foreign exchange derivatives indicate markets are bracing for a fresh round of volatility in sterling, with investors ramping up purchases of options giving them the right to sell sterling if Brexit uncertainty escalates.

You might also like

Pickering Energy Partners launches oil and gas investment banking unit

Cryptoassets increase risk in developing economies, study says

Nobel Laureate Paul Krugman Says US Dollar Dominance Won’t Last Forever

British assets suffered a sharp selloff after British Prime Minister Theresa May’s Brexit deal sparked a wave of resignations, raising serious doubts about her leadership and whether the United Kingdom can avoid a disruptive exit.

The pound fell almost 2 percent against the dollar <GBP=D3> and the euro <EURGBP=D3> on Thursday, a magnitude not seen since shortly after the Brexit referendum in June 2016.

It regained some poise on Friday but investors are taking no chances; market players report a dash for derivatives markets to ensure portfolio returns are not wiped out by wild sterling swings.

“There is a lot of uncertainty out there and investors are doing the prudent thing by adding more protection,” said Jennifer Hau, an FX strategist at Credit Agricole.

In the last few weeks, despite the dramatic daily moves in sterling, traders have appeared reluctant to push the currency outside recent ranges until there is a clearer political resolution in sight. Thursday’s drop only took the pound back to October levels.

Now, as worries grow that May – if she survives – will fail to get her deal through parliament, financial options suggest traders have turned deeply pessimistic on sterling’s outlook.

One-month sterling risk reversals <GBP1MRR=>, an indicator of investor views on the currency’s short-term direction, are now at their lowest levels since September 2016.

GRAPHIC – Sterling positions and valuations: https://tmsnrt.rs/2Pyc26k

The lower risk-reversal prices trade at the more investors are demanding put options – which give investors the right to sell the pound at a future date – over call options, which give investors the right to buy.

That signals that investors are preparing for more sterling weakness by either betting on more downside or buying protection should the currency take another leg lower.

That rush to protect portfolios is also reflected in market expectations of swings in the price of the pound between now and the end of 2018.

One-month implied volatility <GBP1MO=> gauges have spiked to their highest levels since July 2016. At over 15 percent, one-month volatility has entered territory normally reserved for emerging market currencies. Indeed, one-month volatility is now trading higher than that of the Brazilian real <BRL1MO=>

“I’m just trying to keep track of what’s going on and it is like watching the car crash unfold in front of us,” said David Keir, Edinburgh-based co-manager of the TB Saracen Global Income and Growth Fund.

“It clearly feels like maximum uncertainty at the moment.”

BRACING FOR VOLATILITY

All options are on the table as May fights for survival, including the possibility of a UK general election or a second Brexit referendum.

Investors appear most concerned about the next few weeks – one-month options that help protect portfolios between now and mid-December are trading at their biggest premium over 12-month options in more than two years.

GRAPHIC: GBP 1 month rolling volatilty returns – https://tmsnrt.rs/2PwApBf

The market remains heavily short on the pound, and investors are well aware that any glimmer of a breakthrough could trigger a massive relief rally.

Hedge funds deeply pessimistic on the currency have been caught out when Brexit negotiations take a sudden turn for the better.

Didier Saint-Georges, who helps manage more than 50 billion euros (£44.4 billion) at Carmignac Gestion, says investors should avoid direct exposure to the currency if they can.

“It could really go a big way in both directions,” he told the Reuters 2019 Investment Outlook Summit.

(Additional reporting by Helen Reid; Editing by Sujata Rao and Patrick Johnston)

Share30Tweet19
Editorial Bureau

Editorial Bureau

Recommended For You

Pickering Energy Partners launches oil and gas investment banking unit

September 1, 2023
Pickering Energy Partners

Pickering Energy Partners (PEP) announced the launch of a financial advisory unit for oil and gas dealmaking, signaling a renewed commitment to traditional fossil fuels. This move comes...

Read more

Cryptoassets increase risk in developing economies, study says

August 23, 2023
Cryptoassets

The Bank for International Settlements has published a paper that declares cryptoassets , promoted as the future of finance, have not lived up to their promises and are...

Read more

Nobel Laureate Paul Krugman Says US Dollar Dominance Won’t Last Forever

July 19, 2023
Paul Krugman

Nobel laureate Paul Krugman recently wrote an opinion piece in The New York Times where he discussed the dominance of the U.S. dollar and the possibility of the...

Read more

Satya Nadella : Microsoft’s goal is to reach $500 billion in sales by 2030

June 27, 2023
Satya Nadella

Microsoft's CEO, Satya Nadella, informed his staff and the board that the company expected to generate $500 billion in revenue by the 2030 fiscal year. It intends to...

Read more

EDX Markets takes FinTech world by storm with successful funding round

June 23, 2023
EDX Markets

EDX Markets , the trailblazer in offering secure and regulatory-compliant digital asset trading facilitated by trusted intermediaries, has made waves today as it announces the launch and completion...

Read more
No Result
View All Result
Donald Trump

Donald Trump attacks New York court for fraud trial that threatens his business career

October 3, 2023
Uk gurudwara

UK : After Glasgow Gurudwara Incident, Indian National Attacked By Pro-Khalistan Elements

October 2, 2023
SlovakiaElection

Slovakia election : pro-Moscow former PM on course to win with almost all votes counted

October 1, 2023

Tags

australia boris johnson brexit britain British Herald CHINA Coronavirus coronavirus outbreak COVID-19 COVID-19 Vaccine daily roundup Donald Trump Dubai expo 2020 england europe European Union facebook France germany Hong Kong india iran israel italy japan joe biden lockdown London News new zealand north korea politics Rishi Sunak russia south korea spain taiwan trending Trump turkey Twitter UK Ukraine usa worldnews
British Herald

Top News in World: Read Latest News on Sports, Business, Entertainment, Blogs and Opinions from leading columnists.

CATEGORIES

  • Africa
  • Articles
  • Asia
  • Brand Feature
  • Business
  • Climate & Environment
  • Companies
  • Crypto
  • Culture and Lifestyle
  • Daily Roundup
  • Economics
  • ECONOMY
  • Entertainment
  • Europe
  • Fashion
  • Finance
  • Financial Markets
  • Fintech
  • Health
  • IN UK 01
  • IN UK 02
  • Investing
  • Latin America
  • Market
  • Middle East
  • Oceania
  • Opinion
  • Pharma/BioTech
  • Politics
  • Reviews
  • Science & Technology
  • Sport
  • Sustainability
  • Tech
  • Technology
  • Travel
  • UK
  • Uncategorized
  • USA
  • Videos
  • World

BROWSE BY TAGS

australia boris johnson brexit britain British Herald CHINA Coronavirus coronavirus outbreak COVID-19 COVID-19 Vaccine daily roundup Donald Trump Dubai expo 2020 england europe European Union facebook France germany Hong Kong india iran israel italy japan joe biden lockdown London News new zealand north korea politics Rishi Sunak russia south korea spain taiwan trending Trump turkey Twitter UK Ukraine usa worldnews

Herald Media Network Limited (UK). 2023. ALL RIGHTS RESERVED.

No Result
View All Result
  • Home
  • World
    • UK
    • Europe
    • Asia
    • Africa
    • Oceania
    • USA
    • Middle East
    • Latin America
  • Politics
  • Business
    • ECONOMY
    • Financial Markets
    • Companies
  • Sport
  • Fintech
  • Videos
  • BH Magazine
  • More
    • Health
    • Entertainment
    • Science & Technology
    • Climate & Environment
    • Sustainability
    • Food and Travel
    • Fashion
    • Culture and Lifestyle
    • Articles
    • Opinion

Herald Media Network Limited (UK). 2023. ALL RIGHTS RESERVED.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

Go to mobile version