​Weekly Bulletin: Dec 1-5

This week ended with some interesting put volume on the CBOE VIX, as the volatility benchmark moved to some of its lowest levels this year. The decline is being driven by central bank moves, particularly the Bank of Japan’s plan to increase its bond buying program, according to traders. Energy also continued to play a significant factor in the U.S. equity markets this week, as the world’s oil producers continue to feel the pinch of lower prices. Hedge fund investors were spotted playing dispersion via variance swaps on the S&P and its top constituents, as energy companies moved in one direction as a pack, while the rest of the index moved in another. Funds and institutional investors were also seen buying call spreads on the iShares FTSE A50 China Index ETF, reflecting increasing bullish sentiment in A-shares over the short-term. In Europe, Investors are exploring ways to enhance the relative performance of systematic call overwriting strategies in an effort to reduce the call away ratio in the underlying equities of their portfolio, while Standard Life Investments is finding increased justification for buying two-year put options on the Eurostoxx 50 as opposed to holding short futures positions to manage the equity beta of its absolute return funds. We also talk to a pension fund this week looking to swap its external hedge fund vol manager for an internal team. One fund manager we spoke to this week also explains why simple put spread strategies on the S&P 500 are preferable to CBOE VIX-related strategies. Look out for the EQDerivatives Weekly Flow Report on Saturday. The report will be published at 10:00am EST tomorrow covering the major flow trends in equity derivatives in Asia Pacific, Europe and North America.