​Elevated Long-Dated Vol: An Optical Illusion Created By Structured Product Dynamics

Since the beginning of 2016, long-dated vols in the Eurostoxx 50 have been elevated as spot has declined on the back of increased concerns surrounding China and continued depression in oil prices. With spot below 2,900, traders have noted a lack of supply in long-term vol, while calendars are being aggressively offered on single stocks, which is illustrating the impact structured product dynamics are having on European markets. Although much of the coverage recently has surrounded the structured products dynamic in the HSCEI, Rob McGlinchey looks at whether the impact of structured products on European markets over the last month has been overblown, despite estimated peak vega in the Eurostoxx 50 being breached.