Bull Asia

So another day where Asia opens off to the races. Base metals, energy, equities all reacting to what is an equivalent of a 50bp cut by China in their reverse repo operation which has been rumoured for a while. Also to a smaller extent the mere 58% drop in Goldman earnings, which is less than what most had expected. However, note that liquidity is again very thin and SFOT has quickly learned that moves happens not in Asia but in the western timezone where he used to ply his trade. Nevertheless, these few days have relatively mpressive in terms of intraday volatility, particularly in the energy space but we are not breaking out of the 110/115 range anytime soon. Implied volatility is coming off and continues to go lower in this environment. While it is probably not cheap yet, SFOT is now beginning to think about getting long some of these longer dated vega putting them in the drawer in case of a real Iranian conflict. This is no less thanks to a few of his colleagues and the internet having put up more interesting history of the Iranian related middle east conflicts where you can find here and here.
Here in the energy space, the big news is about the closure of yet another refinery, this time in the US. After 3 years and an astonishing 1.3bn loss, Hess and PDVSA finally decided to shut this loss making venture. This is consistent with IEA's release late last night of a fall in oil demand since 2009 and also SFOT's own humble post yesterday. This leads us nowhere as Iranian premium still prevent this market from reacting much. Watch for spreads to continue establishing a firm contango for the mean time.