Hedge funds pile into renminbi FX options

Investors target call spreads and RKOs in what traders say is one of 2022’s most profitable trades

Dollar and yuan notes

Hedge funds have cashed in on US dollar/renminbi moves in recent weeks, sending traded options volumes to at least three-year highs amid a surge in volatility in the recently calm pair.

Spot USD/CNH jumped 7% to 6.79 between the April 18 and May 13 closing prices – the largest 20-day spot price change in years – on the back of a rising US dollar and declining economic expectations in China. A drop in FX volatility supply helped push vol higher, attracting hedge funds who have looked to options

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