TWD Options Bet on Rebound as Bearish-USD Positions Exceed Bullish for First Time This Year
Miles Bennett
A directional shift is underway in Taiwan dollar derivatives: demand for USD/TWD puts — contracts betting on a weaker dollar — surged in the last two trading days of July, pushing monthly notional volume to nearly $8 billion and exceeding call volume for the first time this year. The options market is pricing in a TWD rebound.
What changed in the options market?
DTCC data show that demand for USD/TWD puts — contracts betting on a weaker dollar and stronger Taiwan dollar — surged at the end of July, lifting monthly notional volume to nearly $8 billion.
This marks the first time this year that put volume has exceeded call volume. Early August data show the trend continuing.
This means → options traders are putting real money behind a directional reversal in USD/TWD.
Where is the Taiwan dollar in spot?
The Taiwan dollar fell 1.43% in July — its worst July since 2015.
Yet it has already recovered roughly 0.2% since the start of August, trading near 32.231.
In plain terms = July's decline was sharp, but August opened with an immediate bounce — some investors view the July drop as seasonal and are positioning ahead of a broader recovery.
How are major desks positioned?
Patrick Green, Citi's global head of FX options trading in London, said client interest has picked up noticeably since last weekend, "mainly focused on the downside."
Tenors range from short-dated contracts — hedging upcoming U.S. inflation data — to medium-term bets targeting 31.5 within a month.
This means → the positioning is not just short-term speculation — some players are betting on a month-long TWD appreciation trend.
What other indicators confirm this direction?
The USD/TWD front-end risk reversal — a gauge of how much more traders pay for dollar puts versus calls — has turned negative, falling to its lowest since May. In plain terms = traders are now paying a higher premium to bet on TWD strength than on further USD gains — a classic signal that short-term sentiment has flipped.
TWD non-deliverable forward (NDF) swap points fell into discount territory at the end of July. This reflects the forward market also pricing in TWD appreciation — not an isolated signal from options alone.
What is the key validation point?
OCBC strategist Vasu Menon (王良享) noted that as dollar expectations diverge, some corporates may increase FX conversion or hedging activity.
He said: "Even a small behavioral shift could generate meaningful local-currency demand. The Korean won appears to have moved first; the Taiwan dollar is following."
This means → the current signals come mainly from the derivatives market. If corporate conversion behavior truly follows through, pricing pressure will transmit to spot — whether TWD appreciation momentum can sustain depends on this step materializing.
Content is for reference only, not financial advice.