UK budget gives sterling options traders a wild ride
Reaction to tax cuts sparks most active week for GBP/USD options traders since Brexit negotiations
Sterling foreign exchange options markets remain on edge after a wild ride last week, which saw implied volatility and trading volumes surge to multi-year highs, fuelled partly by rehedging of exotic positions.
Traders rushed to buy put options after UK chancellor Kwasi Kwarteng announced a surprise £45 billion of tax cuts in the so-called mini budget on September 23, causing the sterling/US dollar rate to slide more than 7% within 24 hours. In the following days, demand for options pushed
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