Analysis

Investors seek downside protection in EUR, Cable sees big jump in activity in deep OTM calls

EUR/USD EUUQ7 Open Interest Change: Current (Jul 18 - Preliminary) vs Jul 17 (Source: CME)

Call Summary vs 1.1599

Total ITM OTM
OI Chg OI Chg OI Chg
34,050 722 21,890 -1 12,160 723

 

Put Summary vs 1.1599

Total ITM OTM
OI Chg OI Chg OI Chg
33,547 1,461 1,124 925 32,423 536

 

The open interest (OI) positions in the ITM put options, improved by 925 contracts, while those in the OTM put options jumped by 536 contracts. Meanwhile, no additions were seen in the ITM calls. This indicates the investors are worried about a potential pull back in the EUR/USD pair and thus are seeking downside protection.

The OI in 1.16 Put option jumped by 922 contracts. Additions were seen in 1.1550 Put, 1.15 Put and 1.1450 Put options as well.

It is interesting to see that the OI positions in the OTM calls went up by 723 contracts on a day when the EUR/USD spot rallied to the highest since May 2016. Thus, one may conclude the additions in the deep OTM calls - 1.1750, 1.1850 and 1.19 - could be fresh longs initiated on speculation that ECB’s Draghi may signal taper this week. However, the Bloomberg survey released earlier this week showed a majority of economists expect the ECB to signal taper in September.

 

GBP/USD - Investors continue to boost positions in deep OTM calls

Open Interest Change: Current (Jul 18 - Preliminary) vs Jul 17

Call Summary vs 1.3075
Total ITM OTM
OI Chg OI Chg OI Chg
26,398 721 11,610 25 14,788 696

 

We took note of the big additions in the GBP/USD OTM calls - 1.34 & 1.3350 - on July 17. The preliminary data published by the CME show investors continued to boost positions in the deep OTM calls yesterday.

The total OI in call options, improved by 721 contracts as opposed to 372 contracts in put options. The details reveal - 1.33 call option witnessed an addition of 265 contracts to open interest. 1.3250 call saw an addition of 215 contracts. The OI in 1.3350 call option also jumped by 156 contracts.

The improvement in the deep OTM calls suggests the investors see GBP/USD sustaining a break above 1.30 handle despite the drop in the UK inflation reported by the Office for National Statistics yesterday. Moreover, the GBP/USD pair did manage to hold above 1.30 handle.

 

AUD/USD - Investors preparing for a technical pullback

AUD/USD 0.7850 Put

Open Interest Prior OI OI Change
625 92 533

 

The big jump in the open interest in 0.7850 put option suggests the investors are preparing for a potential technical pullback in the AUD/USD pair. The details of the CME report also shows additions in the ITM (+290) and OTM (+439) calls, indicating the big picture remains bullish. 

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