Article / 09 August 2012 at 13:16 GMT

Equity volatility lower but tail-end risk protection still sought

Head of Commodity Strategy / Saxo Bank

Implied volatility on the four Eurozone equity markets that we track in this report has eased off over the last week following central bank meetings and general positive risk-on sentiment in the market. Protection against tail-end events however keeps OTM volatility elevated.

The tail-end risk however remains high and investors have kept the volatility high on both out-the-money (OTM) puts and calls relative to the at-the-money (ATM).

Implied volatility on the FTSE MIB Index, currently at 30 percent, trades near the lowest level in four months following the strong rally in recent days. OTM volatility however remains elevated above 40 percent. Staying with the MIB the three most traded options strikes over the last five days have all been calls lead by the Aug12 C15000 strike.

FTSE MIB Skew with one week change

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080912_Index Options Update.pdf

Cranberger Cranberger
Ole, can you comment on the nature of Saxo volatility research, does it stop at the smiles or do you do more in depth research into opportunities?


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