Options markets turn more bullish on sterling, pound 'call' premia rise

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Oct 11 (Reuters) – Rising optimism on a possible Brexit deal was reflected in options markets on Friday, with one-month risk reversals surging after Prime Minister Boris Johnson and his Irish counterpart said they might have found a pathway to an agreement.

One-month risk reversals, the contract enveloping the Oct. 31 Brexit deadline, showed a rising premium for ‘calls’ on sterling — options that confer the right to buy an asset . A bearish sterling view would be reflected in a greater premia for ‘puts’.

Brexit negotiations have shifted wildly this week, starting with a public row between London and Brussels and ending with a meeting cast as “very positive” by Irish Prime Minister Leo Varadkar. (Reporting by Sujata Rao; editing by Peter Stoneham)