By Sean Hayden, director of FX products, CME Group
On the day voters went to the polls in Scotland, volume in the front month Pound futures was a brisk 36% higher than the prior month’s average daily volume.
Now that the results are in, the futures and options volume continue to soar. The morning after votes were tallied, nine of the top ten option strikes by volume were British Pound contracts.
Futures prices rallied in the days prior to the vote indicating the market had discounted a vote to secede. Opponents of independence won 55% of the vote while separatists won 45 percent and a record 85% turnout.
Trading in the pound will most likely continue to be in the spotlight even after the vote because leaders across party lines have indicated the union must change going forward if it is to last.
The question of an independent Scotland brought intense interest from around the globe to this country of 5.3m. The British Pound has moved sharply with increased interest in trading.
The latest news from Royal Bank of Scotland that it planned to keep its registered office in Scotland strengthened the currency.
The day the voters turned out to cast their ballot, weekly options comprised over 28 percent of the option volume in the Pound – concentrated in the third and fourth week expiry.
The weeklies are strong because week 3 options expired the Friday after the referendum results came in.
Traders and customers have an increased interest in short dated options because they give the most bang for your buck. If a customer or trader wants to put on a trade to profit in a big move in the underlying future, they can buy a weekly option for the least amount of premium.
The weeklies are liquid and have good depth so as the traction continues they see even more activity.
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