In recent years, Britain, the self-proclaimed nation of spreading civility, has been less than civil.
The Uk is going through its leaders so expeditiously that at this rate, you might have a chance of being the Prime minister in your lifetime.
Furthermore, this confusion is affecting not only the running of the country but other aspects of the economy, and it’s raining havoc on the trading markets.
For instance, options have always been an excellent way to leverage your positions in tough and uncertain times. However, even they have not been spared by the indecisiveness at 10 Downing Street.
Options traders in the UK are finding it more and more challenging to stay in the black, and many fear with the current global financial conditions, it might be so for some time to come. This article will examine how the country’s political chaos has affected the options market and what might be causing it.
Table of Contents
The Brexit Alienation
The UK’s decision to leave the European Union threw a wrench into the country’s relationship with the rest of the continent. Furthermore, before the two struck the exit deal, the ground was shaky for UK traders and further exacerbated by the lockdown period.
Luckily, traders could still access services online on the best options platforms, but the cloud of uncertainty and doom loomed.
However, it finally managed to strike a deal with the EU and amicably left the union. Furthermore, the lockdown period ended, and shortly after, offices opened back up, and people returned to normal.
But as most Brits quickly realised, things were not as business as usual. Britain was now an independent country, and all, including options traders, had to adapt to the new working conditions, which was not easy, to say the least.
A Weakening Pound
Along with adapting to a new marriage agreement in the EU, the British pound has also been taking a beating from the US dollar. Traders in the country are used to having the upper hand with the stronger currency, giving them an added advantage over the dollar.
However, today Uk options traders have to contend with higher prices as the pound is trading at par with the dollar, and their advantage is no longer there.
Furthermore, the UK has had to negotiate new trade deals with all its trading partners and make new bilateral agreements. This has taken the time and introduced unique intricacies everyone in the country has to adapt to.
It will also take time for things to settle down and for traders to start working in unison with their counterparts from different regions of the world as they used to.
Before then, options traders will have to contend with all these challenges and make lemonade out of lemons.
This also means that buying options in the international market has been more expensive than British traders anticipated, chipping away at their profits. In addition, the political uncertainty created by the constant removal of Prime Ministers and the shifting of economic recovery strategies has not helped the situation.
The world’s financial system is also in a recession, and the Bank of London, as well as other central banks worldwide, have had to raise interest rates to mitigate its effects.
This has made credit more expensive and harder to come by for all investors, including options traders. And once you factor in the weaker pound, it’s no wonder the industry is struggling.
To Sum it Up
Britain is one of the biggest economies in the world, with one of the best living standards. Its industries have produced some of the most significant machinery known to man and some of the best technologies in fields such as medicine and trading.
But as its exports are massive and impressive, so are its problems.
The political scene over the last few years has experienced significant turmoil, and the effects are finally catching up with the country’s economy. The reality of leaving the EU is also set in, and with the current financial situation, Brits might have more on their plates than most others.
Furthermore, the trading industry has not been left unscathed. Safe havens like derivatives, such as options trading, are not the money-makers they usually are. However, with a new PM and how things look, there might be light at the end of the tunnel.