1) Headlines in the CITY AM paper today: "BROWN CRUSHED AS VOTERS DUMP LABOUT". GBP continues its slide 4 days on the trot, coming off 5% from its high. This is dragging the EUR down at the same time and we need no longer go into the discussion what the impact on WTI is due to EUR strength.
2) Short rates in US rose over 40bps in 2 days. While the macro punters were having nice MTMs due to reflation play, curve steepners, owning inflation assets like WTI in Dec10 and Dec11, this latest spike in short rates seemed totally unwelcomed. A rate hike fully discounted by year end?? Little wonder equity markets are not happy over this as well. Whatever the case, vol in most asset classes should start to pick up a little as this situation seems like a little preview of what can happen if those 'greenshoot' trades are overdone.
Direction in crude oil should continue to be dominated by a gloabl macro theme now, and at the moment it looks weak. However, all could change, as the momentum seems to be on the upside. More buying of 100calls in 1-2yr out period, especially from speculators as CFTC reveals both open interest and net length on the up. Perhaps now is a good time to own some gamma, and SFOT shall do just that for a short term punt.
Morning SFOT.. how do you generally put on gamma trades? On equities i generally go a few strikes out from ATM calls and punt the short futs against them.. Is this similar to what you do?
ReplyDeletethat's one way.
ReplyDeleteAny thoughts on vega (I'm thinking F10 expo)? Implieds are cheap relative to recent history, but not (even) to levels we saw in late '07, when 1y (Z8) was 25%.
ReplyDeleteRegards, MW
From a simple view that if those reflation trade keeps going, being long vega is something I find a waste of VAR. Rather, at this point I would prefer to be gamma positive.
ReplyDelete