Traders Suffer Losses on Options After U-Turn in ECB Rate Bets
The European Central Bank headquarters in Frankfurt.
Photographer: Alex Kraus/BloombergA sharp swing in European money markets from bets on central bank interest-rate cuts to hikes has caught traders off guard, forcing some to exit options at hefty losses.
Three such wagers on European Central Bank cuts were liquidated on Wednesday for a total loss of more than €3.6 million ($4.2 million), after an initial cost of less than €500,000. The bets were initiated in January and February, and financed by selling options that relied on no pricing for rate hikes.