The “Trump Deal” is making a comeback! Demand for US dollar call options surges

The Zhitong Finance App learned that due to speculation that Republican presidential candidate Trump will win the US presidential election next month, hedge funds are increasing their bets on rising exchange rates of the US dollar against the renminbi, the euro, and the Mexican peso. Traders said that in the foreign exchange options market of more than 300 billion US dollars, US dollar call options are becoming more and more popular, and if the exchange rate of the US dollar rises against other currencies threatened by tariff policies, the value of these options will rise.

Saurabh Tandon, head of global foreign exchange options at Standard Chartered Bank, said: “When Trump's odds began to shift in his favor last week, this bet began to increase.”

As the US election date of November 5 approaches, the surge in options trading echoes the actions of some of the world's largest companies to hedge against exchange rate risks. In the gaming market, Trump narrowly led Democratic presidential candidate Harris. This has put pressure on investors to weigh the impact of Trump's re-election on assets everywhere.

Just over a week ago, hedge funds had yet to show a clear position on the US election results. Trump has previously threatened to levy full tariffs. As the election situation is moving in favor of Trump, market participants are beginning to think about what this might mean for the yuan, the euro, and the Mexican peso.

George Boubouras, head of research at K2 Asset Management, said, “Interest in foreign exchange options has heated up over the past week, but it hasn't peaked yet.” “This is the most important election, and you need to be careful.”

Saurabh Tandon said that the rise in option costs may prompt investors to focus on more currencies that may be affected in the coming days. As an alternative trade, Saurabh Tandon recommends a put option on the Australian dollar, which will appreciate if the exchange rate of the Australian dollar weakens against the US dollar.

Shoki Omori, chief strategist at Tokyo Mizuho Securities, said: “Options trading is likely to continue to soar. Considering that the dollar is also a safe haven, it is easy to profit from betting on a stronger dollar.”