Peter Wadkins Currency Options and Flow Volume

 Just don’t see this type of Fx Research anymore and this

Was common just a few short years ago. Enter and target = profit destroyed today’s market and vast majority can’t enter, target and profit correctly.

BUZZ-Asset managers’ alpha thirst drives CAD secs flows

Nov 16 3:52pm By Peter Wadkins

CAD looks vulnerable judging by U.S. and Japanese equity movements since quarter end. Today’s Canadian international securities data highlights the impact of alpha on asset managers’ investment decisions. Canadians invested just 1.7bn in foreign equities in September vs August’s 7.2bn. It’s the August data that’s the outlier. On August 1 USD/CAD was 10% below May’s cycle peak, with the S&P up 5.3% and USD/CAD appearing to form a base above 1.2400. U.S. stocks looked cheap. The S&P’s rally peaked early, August 8. A week later so did USD/CAD. Lack of either FX alpha progress or underlying asset appreciation, prompted fund managers to start hedging U.S. assets. Volume spikes in FX and S&P futures at month end hint at sizeable flow. In September, foreign asset managers bought 18.7bn of mainly short-dated Canadian bonds, double August’s total. Offshore investors were rewarded on Sep 6 when the BoC hiked rates and USD/CAD plunged. By month end CAD/JPY rose 3.7% and EUR/CAD 1.5% more than offsetting fixed income losses. Since quarter end the Nikkei’s +9.0%, CAD/JPY is -1.7%, the S&P +2.7% and USD/CAD +2.1%, the TSX +1.9%. Portfolio rebalancing’s already underway.

RM weekly CAD flows, charts EURCAD & CADJPY:


BUZZ-FX options flows hint USD could still breakout

Nov 16 5:55pm By Peter Wadkins

Yesterday’s Deutsche Bank weekly option flow report noted the USD was the only major currency that benefitted from inflows, Swiss was the most sold, mainly USD/CHF calls however volumes dropped approximately 25%. That’s surprising because IMM CHF shorts jumped 20% – implying the options market is less convinced the topside’s going to break. Deutsche Bank’s SVACHF report (Skew Volume At-the money) indicates greater buying of USD/CHF calls over puts at roughly 2.3% of net. The BIS puts Swiss options volume at about USD 5bn a day so it’s not a huge number vs spot turnover. NZD puts over calls 2.2% of net, turnover USD8bn (BIS), so USD900mn for the week. CAD puts over calls around 1.7%, CAD options turnover 14bn a day (BIS) USD 1.2bn for the week. JPY as of Tuesday night was still being net sold, but puts over call sales dipped below 1% of net, with daily option turnover 74bn (BIS) that’s still 3.3bn for the week. The options market seems to be saying the buck could still breakout.

FX option flows:

BUZZ-EUR/USD options flow, gravestone question rally

Nov 15 2:56pm By Peter Wadkins

Today’s weekly Deutsche Bank FX option flow report reveals the USD was the only currency benefiting from inflows last week (1.1% vs 0.9%). Between Nov 7-14 the DXY dropped 1% while EUR/USD rallied 1.8%, so option flow implies options desks counter-traded the underlying USD move. Deutsche Bank’s SVAEUR report (Skew Volume At-the money) indicates greater buying of EUR/USD puts over calls for a second week. According to BIS data EUR/USD options turnover is around USD 64bn per day. Deutsche reported put volumes were a net 1.0% over calls which implies global buying of ATM EUR/USD puts over calls around EUR 540mn. That smacks more of value buying than sentiment shift but it’s interesting nonetheless. Deutsche Bank notes a correlation between their EUR data and IMM positioning data of 43%since 2014. Last week the IMM added almost 20% to EUR/USD longs. Both Deutsche and HSBC concur options flow and IMM positioning are good indicators of spec positioning. Given the discord between the two this week something’s amiss. The gravestone Doji on today’s EUR/USD candle is very bearish. EUR/USD bulls should be cautious.

EUR, EUR IMM positions


BUZZ-EUR flows: HF short squeeze, corp hedgers buy

Nov 14 3:58pm By Peter Wadkins

Global traders added to EUR/USD longs last week judging by Citibank’s weekly flow report. Last week Citibank saw USD net outflows of 3.8% of average weekly volume which, using the BIS 2016 triennial survey data as a benchmark, implies USD/G10 shorts grew roughly USD 180bn. EUR longs jumped 3.2% or approximately EUR60bn by the same criteria. However unlike the prior week, hedge funds were the biggest EUR buyers at 4.1% of their average weekly flow while banks and real money stood aside. Banks and real money remain long, but we estimate using Citibank’s flow data and BIS client group weightings that banks are long EUR/USD roughly E140bn, while RM, the next most active group according to the BIS are long 27-30bn. By the same criteria, corporate hedgers are even longer, having bought some E40-50bn over the past 9 weeks. HFs appear short EUR/USD, having sold some E11-13bn over the same time frame but they may have had residual longs heading into the period. Whatever the case, they’re buying EUR/USD on the short-squeeze. The long EUR/USD position overhang should slow EUR’s ascent.

BIS Triennial survey:

FX market turnover by counterparty:


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