Traders are driving up sterling options activity as they position for the UK budget announcement scheduled for October 28, with pricing already beginning to reflect the event risk.

Implicit volatility on one-month sterling-dollar options, whose expiry covers the budget date, rose by as much as 47 basis points to 5.96%, the highest level since July 29, before paring gains. The relative term premium shows options are trading roughly 77 basis points above realized volatility. Risk reversals narrowed slightly but remain tilted toward dollar calls, with the spread at 81 basis points.

Data from the Depository Trust and Clearing Corporation (DTCC) for September shows traders have started building positions tied to UK budget risk, though the scale remains relatively modest so far this month. Only about 6% of total notional volume is concentrated in options whose expiry window covers the week of the budget release and the following week. Within that slice, bearish sterling structures account for 67%, compared with 55% across the full sample, indicating a heavier tilt toward bearish pound positioning during the event window. Concentration is even more pronounced in euro-sterling, where roughly 9% of total notional volume expires in the same window, with about three-quarters of that in bearish sterling structures.