GBP/USD: Options market turns bearish on Sterling

GBP/USD risk reversals turned bearish earlier this week.
Put options are drawing the highest premium since mid-December.

Omkar Godbole FXStreet Contributor

Options market turned bearish on Sterling earlier this week and the premium claimed by put options (bearish bets) hit three-month highs on Thursday.

One-month risk reversals (GBP1MRR), a gauge for calls to puts on Sterling, topped out at 0.387 on March 9 and fell below zero on the following day.

A positive number indicates the demand or the premium claimed by calls (bullish bets) is higher than that for the put options.

So, a drop from positive to negative territory, as seen in GBP/USD this week, indicates a bearish reversal.

The gauge fell to -1.475 on Thursday, the lowest level since mid-December. Essentially, the bearish bias is strongest in three months.

At press time, GBP/USD is trading near 1.2550, having turned lower from the one-month high of 1.32 reached on March 9.

GBP1MRR

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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