Ruble Options Volumes Surge 900% as FX Traders Wager on Rebound

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(Bloomberg) -- Currency traders -- caught off guard by the most punitive U.S. sanctions yet on Russian companies and oligarchs -- are plowing into the options market positioning for a rebound in the ruble.

Options transactions reported Thursday to the Depository Trust & Clearing Corp. were more than 900 percent greater than the five-day average as of 3:30 p.m. New York time, following a similar surge in activity Wednesday. About $2.2 billion of dollar puts outweighed roughly $1.3 billion of calls, suggesting traders are hedging against a sharp recovery in the Russian currency.

The ruble fell as much as 11 percent this week to 65.06 per dollar, the weakest since 2016, as the U.S. said it would impose penalties on dozens of Russian tycoons and companies. One-month implied volatility in the dollar-ruble pair remains near its highest in almost two years, according to data compiled by Bloomberg.

“When you see a move like that in spot markets, you tend to see a pickup in volumes in other areas, including options, said Bipan Rai, Canadian Imperial Bank of Commerce’s North America head of foreign-exchange strategy.”

Risk reversals, a barometer of sentiment and market positioning, are also hovering near two year-highs as traders look to profit from a bounce back in the ruble while remaining cautious about further weakness if geopolitical risks resurface.

©2018 Bloomberg L.P.

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