Trader bets against the ECB rate cut, 2 million euros in options for a return of 25 million.

Traders are currently positioning themselves through options strategies on the expectation of a rate cut by the European Central Bank (ECB). If the policy is implemented in the coming months, they stand to gain substantial returns. This week, there have been several large bets in the market related to options linked to the Euribor, a three-month Euro interbank offered rate. These derivatives give the buyer the right to buy or sell underlying assets at a predetermined price, without any obligation to do so. Specifically, if the ECB cuts its benchmark rate from the current 2% to 1.5% before December and maintains it until March next year, the investments could yield over 25 million euros (approximately 28.5 million US dollars), with a cost of only about 2 million euros. Even if the deposit rate is lowered by only 50 basis points by early 2026, the strategy could still be profitable. It is worth noting that ECB President Lagarde has previously stated that policymakers may enter an observation period after cumulatively lowering the deposit rate by 200 basis points to 2% within a year. However, the market still assigns a 50% probability of a further 25 basis point rate cut by the end of the year, providing some room for speculation. Expectations for the interest rate path in the currency market show fluctuating characteristics. Two months ago, when expectations for increased tariffs in the US were rising, the market was predicting a year-end rate of 1.5%. However, recent slight increases in inflation indicators in some regions of France and Germany have shifted the focus towards price stability. A Bloomberg survey shows that 20% of economists expect the benchmark rate to be lowered to 1.5% by the end of 2025, while the majority of analysts are divided between scenarios of "maintaining at 2%" and "further lowering by 25 basis points to 1.75%". This divergence reflects that, despite the cooling of rate cut expectations, traders are still trying to capture potential policy dividends through option structures.