A whopping $3.4 billion in notional USD/CAD options expires tomorrow at 1.05 at 10 am New York time. There is also a huge $3 billion strike at 1.1000. Tomorrow’s expiry is the largest since at least February (before that it’s hard to get good data).
It’s hard to put into perspective how big $3.4B is in USD/CAD. It’s often a month between options valued over $1 billion.
Those options have been on my radar for awhile and it will be interesting to see how it plays out. The two massive options 5-cents apart points to some kind of paired trade, maybe buying 1.05 calls and selling 1.10s to help fund it.
On July 22, a similar trade may have taken place with $2.26B at 1.05 and $750m at 1.0750 but USD/CAD traded in a 1.0300-1.0340 range that day. On that day it might have simply been too big of a hill to climb.
From a fundamental perspecitive, the best reason for USD/CAD longs is the obscene spread between WTI and Canadian benchmark Western Canada Select. It hit $40 today and is $2.50 away from the widest on record.
WTI-Western Canada Select spread
