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Short Sterling Option Comment **26/01**

Not a huge amount of action today, very front vol in slightly and a little bit
more bid further along the curve after the large buyer of put spreads in Sep.
We've seen sellers in mid March of the 98.875 up call conder, 7K @ 0.5 today,
paper was selling the mid June yesterday also at 0.5 in 25K. I'm told paper
paid 4.5 on 40K in the Marchs at the end of Oct with futures trading around
98.80, ouch....

15:14 0LH1 -7k 98.875/99/99.125/99.25 Call CONDOR @ 0.5
12:57 L Z1 -10k 98.5 Call @ 33
12:52 L U1 +20k 98.625/98.375 Put SPREAD @ 6 VS  81
12:49 0LM1 +10k 98/97.5/97 Put FLY for 8
10:42 L H1 -5k 99/98.5 Put 1x2 @ 1
08:48 L H1 +5k 99/98.75 Put SPREAD for 1
07:50 L M1 +1.5k 99/99.125/99.25 Call FLY for 2.5

I like the look of this first trade of the day but couldn't for the life of me
find a 2.5 offer once this had gone through. Best I could find is a 3 offer but
think this may still offer some good value. I just think that despite the
recent GDP/MPC votes, King has made it very clear that they are monitoring
medium term inflation most importantly and therefore a rate hike in the near
term is highly unlikely. With that in mind and also taking into account the
gentle trend in sterling libor the 99.125 strike would seem the most likely
expiry lvl for June Sterling in which case for 3 ticks for this call fly offers
good value in my humble.....

DS