After President Trump announced plans to impose tariffs on Mexico and Canada, some leveraged funds returned to dollar call options, anticipating a rise in the US dollar against its Canadian counterpart. This volatility follows a previous unwinding of similar trades when Trump initially appeared to delay tariff implementation.
The loonie saw a slight jump following the Trump administration's postponement of tariffs. Gavin Graham, CIO and portfolio manager at Spire Wealth Management, e
Some hedge funds returned to currency options on Tuesday that gain in value if the dollar rises versus peers, especially the Canadian dollar, after Trump said that he plans to enact tariffs of as much as 25% on Mexico and Canada by Feb. 1. Hours prior, they exited similar trades after Trump appeared to delay imposing further tariffs immediately on trading partners.
Long dollar calls versus the yuan, euro and Canadian dollar were unwound just after Trump’s inauguration ceremony because tariffs weren’t specifically mentioned, Daga said. After the Canada and Mexico announcement, “we have seen a few speculative buyers of dollar call options against the Canadian dollar especially re-emerge,” he added.
Dollar-Canadian dollar options were the second most actively traded on The Depository Trust & Clearing Corporation as of 11:50 am Hong Kong time. It was the second-most-traded currency pair on DTCC on Monday, trailing only euro-dollar.
TRUMP TARIFFS US DOLLAR CANADIAN DOLLAR FX OPTIONS TRADING VOLATILITY
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