Delta hedge unwind hits dealers
LONDON - Options dealers are speculated to have taken a hit while unwinding delta hedges against puts with a strike at ¥90 that expired last Wednesday (January 21).
The puts were the lower leg of a one-year put spread structure and are believed to have had a notional value of around $7 billion. The rapid unwind of the large delta hedges caused a sharp intra-day drop in USD/JPY of 2.9% to ¥87.13 on Wednesday.
Dealers of the options had increased their delta hedges in the run-up to expiry, fearing
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