Morgan Stanley reportedly bought two yards of dollar puts/Canadian dollar calls Wednesday. The move sent one-week implied vol rocketing from 6.5% to 8.5%. The trade was executed in an hour and one trader said it is the equivalent notional size as goes through in an average week.
Traders said the firm bought one and two-month at-the-money options when spot was at CAD1.59. Traders speculated the options were executed for a customer who wanted to pull the trigger at a particular spot rate and did not care about the price. One trader estimated executing a position of this size over such a short period probably cost the customer an additional 10-15 basis points of the notional size than it would have cost to buy it over a couple of days.
