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Trading SONIA contracts

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Hi all,

I am sure like many of you, I am interested in trading some of the short-dated SONIA contracts (probably June) to express a view on the BoE given looming rate cuts and Bailey's dovish turn! However, I have noticed that the margin requirements are really high for the SONIA contracts? Something like £900 for the minimum size (0.5 per point)? To me, this doesn't make a lot of sense given the likely volatility in the series (and profit / loss up for grabs).

By my calculations, the realistic best case scenario is that the Bank of England cuts rates in May and then June, meaning that the June contract moves to 9525. That means I make only about £9? Equally, worst case is that Bank rate stays unchanged at 5.25%, meaning a loss of only £16... So I am just struggling to understand why the margin requirement is so high in proportion (c£900). Thus, if my thinking is correct, is it a more efficient allocation of capital efficient to choose a different expression to express BoE rate views? E.g. a gilts etf or even GBP.

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  • 2 weeks later...

Margin requirements for SONIA contracts may indeed seem high due to their significant size coupled with the expected market volatility. Given possible changes in Bank of England rates, it is worth weighing the risks and possible potential losses. It may be worth considering alternative ways of expressing your views on betting policy, such as ETFs or GBP trading.

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