​Daily Bulletin: Wednesday Dec. 17

The decline in long-dated fixed strike vols when the Eurostoxx 50 fell in October, which has been exaggerated by structured product dynamics as retail investors in Europe increasingly hunt for yield, has led to an ‘Asianification’ of Eurostoxx 50 vol that is similar to that in the Kospi and HSI. Bank of America Merrill Lynch noted investors should aim to hedge Eurostoxx 50 downside next year through puts, with shorter term put calendars particularly appealing since puts greater than one-year in tenor may underperform due to muted gains in vol during an equity selloff. In the U.S., market players are predicting sharp spikes in the CBOE Volatility Index following long periods of quiet could become the new norm, making trading difficult. BGC’s Woodard also takes a look at today’s rally in energy stocks. Options in the US-listed ADR for BP were especially active. At noon Eastern, more than twice the one-month average daily volume had traded.