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Morgan Stanley IM retools renminbi options strategy

Created at 21 Jul · 3:41 AM1 source↑ Market-relevant
IN SHORT

Morgan Stanley Investment Management has revised its Chinese renminbi foreign exchange options strategy, reducing strike prices closer to spot and lowering premiums. The fund manager is rebuilding its USD/CNH call book to $15.7 billion.

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Key Numbers

$15.7 billionUSD/CNH call options holdings
$650 millionpremium cost of previous strategy

Who's Involved

Morgan Stanley Investment Management
US fund manager revising renminbi options strategy

↳ Why This Matters

This strategic shift by a major investment manager indicates a potential change in market expectations for the renminbi's future direction and reflects a move towards more cost-effective hedging or speculative positions in the currency options market.

Key facts

  • Morgan Stanley Investment Management has altered its long-running Chinese renminbi foreign exchange options strategy.
  • The fund manager is now using strikes closer to the current spot rate.
  • This adjustment aims to reduce premium costs.
  • The fund manager's holdings of USD/CNH call options have been rebuilt to $15.7 billion.

Morgan Stanley Investment Management (MSIM) has reconfigured its strategy for Chinese renminbi foreign exchange options. The fund manager has been rebuilding its USD/CNH call book, with current holdings reaching $15.7 billion. This revised approach involves setting strike prices closer to the current spot rate, which consequently lowers the cost of premiums. According to Risk.net research, MSIM's previous strategy would have only paid out once since 2020, incurring nearly $650 million in premium costs.

Frequently asked questions

MSIM is now using strike prices closer to the current spot rate for its USD/CNH call options, which reduces premium costs.

The previous strategy would have paid out only once since 2020, costing nearly $650 million in premiums.

The fund manager has rebuilt its holdings to $15.7 billion.

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How It Developed

Morgan Stanley Investment Management has revised its Chinese renminbi foreign exchange options strategy.
The fund manager is building up notionals based on closer-to-the-money strikes.
Regulatory filings show the US fund manager's holdings of USD/CNH call options have reached $15.7 billion.

Sources

T1
MSIM retools renminbi options wagerRisk.net

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