Premium

Options market shows insider alarm on 'Frexit' upset

France
Polls show Leftist insurgent Jean-Luc Mélenchon would beat the conservative François Fillon in a run-off, giving markets fresh cause for worry

The financial derivatives market is flagging mounting concern over the first round of the French elections on Sunday, with a surge of interest in options used to hedge extreme outcomes.

One-month ‘risk reversals’ on the euro - a gauge of demand for protection against a sudden plunge in the currency - have reached the most extreme level since the height of the eurozone debt crisis in late 2011.

This suggests that an informed core of hedge funds, banks, and traders are sufficiently concerned about an upset result that they are willing to pay a large premium for ‘put options’ on the euro, even though the euro exchange rate against the dollar is showing no sign of stress.

Simon Derrick from BNY Mellon said this replicates the pattern before Brexit. “The price action feels to me like last summer. The pound was rising just before the referendum but people were hedging Brexit risk on the options...

Premium

Subscribe now for full access or register to continue reading

Subscribe now for full access or register to continue

Register / free

No Payment details required

  • One Premium article per week
  • Newsletters and daily briefings
  • Comment on articles

Premium / 30-day free trial

then only £2 per week, cancel anytime

  • Unlimited Premium articles
  • Exclusive Subscriber Events
  • Enjoy Telegraph Rewards
  • Comment on articles
  • Newsletters and daily briefings
  • Complimentary digital access to The Washington Post
  • Find out more
Premium Promo
Subscribe today and explore Europe with Avios
Collect up to 20,000 Avios with an annual subscription
Terms and conditions apply
Please review our commenting policy