Options - USD
Vols are back higher today, led by gamma in the belly of the curve. Price action remains noisy, chaotic. BofA sees vol stuck between stress and Fed.
USTs plunged more than 30bps after weak ISM, and the UK reversal on tax cuts. The very ULC held a bid while the rest of the surface dipped lower.
The right side of the surface is saw selling pressures with 1y10y and 6m10y trading down. The left side remains better bid for the most part.
High realizeds, violent moves have further upended the markets. Vols are up, led by ULC, but little has traded. 5y, 10y tails, 1y10y riskies trade.
Vols ticked up higher still with pieces like 1y1y near highs. With the extreme moves, small positions are magnified, sources say. Citi examines skew.
The vol surface surged higher today with 3m to 6m expiries rising as much 12 normals. Sources report offers peeling back - and wide. ULC also popped.
The double digit UST selloff spurred some vol buying in pieces like 1y1y, 3m10y and 2y10y, but the move did not goes as far as some thought it might.
The vol surface was already under pressure pre-FOMC, but has seen around a doubling of the move in the post-FOMC flush lower.
The right side is outperforming today as the underlying curve steepened. 10y tails led the move. Participants mostly describe conditions as illiquid.
The vol surface is flattening. Gamma is off the earlier levels amid light trading. Citi sees 2y vol term structure signaling extended uncertainty.