​Prospect Of ‘Asianification’ Of SX5E Vol Highlights Value In Shorter-Dated Puts

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. According to Bank of America Merrill Lynch, 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.