​Weekly – VIX Weeklys Developing; Short VIX Opening Convexity

Just two weeks in and CBOE’s VIX Weeklys have already surpassed the bourse’s short-lived short-term VIX contract, which ceased operations in June. While some are still skeptical of the illiquidity, meaning large contract sizes are not yet possible, others are happy with how the contracts have developed in just two weeks. Meanwhile, the recent large inflows into high yield credit recently is seeing price rises in equity options, as some supply is taken out of the market. This could be a benefit to dealers, as the new price dynamics may mean they’re able to provide more liquidity to the market. In Asia, we look at how recent moves by the Korean regulator to clamp down on structured products using the HSCEI as an underlying is changing the vol profile of the Chinese market. One relative value manager is waiting for the dust to settle, hoping some opportunities will open. Our latest buyside commentary this week comes from Julien Messias, managing director – portfolio manager at Uncia Asset Management. He’s looking at how to properly price earnings implied moves.