Weekly: Questions Around Skew; Dealers Offering VIX Exotics
Jan 22, 2016
U.S. equity markets again showed how correlated they’ve become recently to oil this week, as the major benchmarks followed crude down. While the wider equity markets nosedived, it seems derivatives pricing isn’t matching for some reason, with S&P skew staying pretty flat. Also this week in the U.S., Some dealers have found traction selling exotic options on the VIX recently, such as up-and-out calls on VIX futures and VIX hybrids contingent on rates, while one investor was seen selling a March 125/130/135 call fly Thursday on TLT that unwound a position put on in December. In Asia this week, increased scrutiny from the South Korean regulator in equity-linked and derivatives-linked securities will result in smart beta and hybrid ETFs attracting significant capital in 2016.
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