Index options: Protection against tail-end events keeps vol high
Volatility on the four European stock indices covered in this report has risen slightly during the last week. As we approach some key dates for Europe and the world, such as the Jackson Hole annual economic policy symposium at the end August, a European Central Bank meeting with Draghis plan for plan on September 6 and a ruling by the German Constitutional Court on the legality of a permanent bailout fund on September 12, investors have increasingly been looking for protection against tail-end events.
The outstanding puts over calls ratio has risen for the DAX, AEX and CAC with the latter reaching the highest level for more than a year at 1.5, showing continued interest to buy puts in order to protect against any market negative news.
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