The demand for structured and plain-vanilla Korean won/dollar options has doubled as the dollar slides against the Asian currencies. The trades have also caused 25-delta risk reversals to flip to favor dollar puts. The boost in volumes has been most prevalent in won/dollar but, "There's an increase in demand for options across all Asian currencies," said Peter Redward, Asian currency strategist at Deutsche Bank in Singapore.
Claudio Piron, head of foreign exchange strategy at Standard Chartered Bank in Singapore, said, "With the dollar's precarious state, it's wise to hedge the risks." One area of demand for options is Korean exporters hedging their dollar exposure with longer-term options, such as six-month won calls/dollar puts or by entering range forward strips, according to Piron. Traders have seen the heaviest activity in won calls/dollar puts in the three-month range at KRW1,260. For example, a corporate could buy a strip of six-month won calls with strikes at KRW1,270 and won puts with strikes at KRW1,310. At the end of each month the hedger is can sell dollars at between KRW1,270-KRW1,310, but cannot benefit from spot going above KRW1,310. The typical notional size is USD1 million for each leg of the transaction.
