Trade idea: update on paid short sterling

Just over a month ago I posted a trade recommendation to sell front short sterling contracts (here). The trade summary was:

UK rates trade

With a 300k DV01 allocation (100k in each bucket) the current PnL on the trade is $4.1m, close to half way to the target.

short sterling trade update

The trade is working nicely, but I wonder whether it might be worth taking some profit. Q1 GDP was softer than expected in the UK, and other activity indicators have also come off a bit (although the labour market goes from strength to strength and the euro zone is stablising/improving). But the curve has essentially just taken out the (ridiculous) rate cuts it priced after the Haldane speech (my review here) and brought forward the timing of the first rate hike a couple of months to August 2016. I still think we can get a first rate hike materially sooner and so am happy to stick with the trade.

short sterling rates update

3 thoughts on “Trade idea: update on paid short sterling

  1. Really nice call. Unfortunately I don’t have access to those markets, I’m too small fry.

    Perhaps cover your risk?


    1. Thanks. Maybe time to cover. FWIW you can access these markets through a spread betting site such as IG (I think you are in the UK?). The slippage isn’t too bad, but the margin is quite hefty.


      1. Yes I am in the UK, I think ETX did have those markets, but I haven’t traded with them in months. Might have to go back… thank you


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