Trade review: short sterling

I closed out my short sterling position on 13 May (see here for original trade analysis and here for close post), following the release of the BoE’s Inflation Report. I was concerned that the BoE was taking a more dovish tone and that the risk/reward to the front end was shifting. Having spent some time reviewing the BoE’s comments (here), I now think that not much has changed, so will look to re-engage on a dip.

Here is how the trade performed:

Initiated: 24 March; Close: 13 May

What was it: sell 100K each of L Z5, L H6, L M6.

Summary table:

short sterling close

While I closed out well short of my target PnL, the skew was so extreme on this trade, that I still finished with a very health profit.

Chart of shift in expected rate path between initiation and close (and showing the slight retracement since close):

uk short sterling close chart

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