Asia Funds Scout Funding-Leg Replacements In Scramble To Replace SPX Shorts

The February 5 volatility spike forced a major rethink of the short volatility trade, as liquidity evaporated from the S&P 500 options market; a rethink that reverberated around the globe. In the Asia Pacific region, relative value funds quickly pulled the plug on their short SPX funding legs in favor of other avenues, with one of the biggest impacts seen on the Australian S&P/ASX 200, which absorbed a big chunk of that trade over April. The impact on AS51 has many pointing to the evolution of the short vol trade from a straight equity play to something with more multi-asset elements. Daniel O’Leary reports on what happens when hedge funds sour on the biggest short in the business.