EUR Vol: Implieds lower; Calendar spreads eyed

Grid black white 9 Nov 2020
Implieds headed lower while some eye calendar spreads.

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  • Implieds lower; Calendar spreads eyed 
  • New structured issues

    Implieds lower; Calendar spreads eyed
    Euro vols headed lower today amid signs of stability in the underlying with the 10y yield closing only a couple of bps higher around 2.73%.

    “A lack of realised volatility has helped,” said one euro vol trader as gamma dropped up to 6.5 normals lower in pieces such as 3m5y across the belly. “Unlike the dollar market which has been heavily focused on 4% we don’t have the same levels in euros,” he felt.

    At the same time, it was suggested there could be some tentative selling interest with positioning cleaner. “Some accounts had been sellers of the front-end based on the conviction that terminal rates were unlikely to go above 3.75%. But that view has been shaken out and now things are feeling cleaner,” he felt.

    In terms of flows, it was suggested that clients might look at calendar spreads, “That’s probably the safer way if you want to look at shorting vol.”

    For euro option trades on the SDR see here and for volumes please see here. Note that the Total Derivatives SDR now shows broker/platform information for each trade, where available.


    New structured issues

  • UniCredit Bank issued €15m 11y NC6 covered callable due Dec 2034. Coupon pays 3.75% with single call in Mar 2029. Self-led.