FXCM options activity surges after Swiss shock

Fri Jan 23, 2015 3:26pm EST
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By Saqib Iqbal Ahmed

NEW YORK (Reuters) - Losses from the surprise move by the Swiss National Bank nearly crippled brokerage FXCM FXCM.N, but all the attention has resulted in a surge of activity among options traders on the online forex broker.

FXCM's shares fell nearly 90 percent on Tuesday after the company faced $225 million in losses on the SNB's shock decision last week to remove the cap on the Swiss franc. It then agreed to an emergency loan from Leucadia National Corp LUK.N.

The loan kept FXCM from falling short of regulatory requirements that could have kept it from operating. The shares, which touched a low of $1.28 on Tuesday, have recovered slightly, though on Friday they were down 31 percent at $2.14 in active trading on the New York Stock Exchange.

The drastic drop in the price of the shares has spurred a surge of interest in both the stock and its options, with some hoping for a buyout for FXCM.

"The action in the underlying stock has been highly speculative and now it’s moved to the options market," said Ian Bezek, an independent trader based in New York.

Recent trading appeared to be driven by speculative call buying, said Fred Ruffy, options strategist at WhatsTrading.com.

Options trading in FXCM shares had been sparse, averaging less than 15 contracts a day last year. The volume has now exploded and since Tuesday has averaged more than 50,000 contracts a day.

"The stock suffered such a big sell-off that the logic might be: 'Well, if it recovers even 20 percent of the losses, that translates to a substantial move higher from current levels,'" Ruffy said.   Continued...

Swiss one franc coins are seen in this illustration picture taken in Zurich January 19, 2015.    REUTERS/Arnd Wiegmann