Options - USD
The ULC cheapened up as much as 9 normals today, leaving bids scurrying. Some wonder if more cheapening is in store. Deutsche sees a ULC conundrum.
The vol surface is lower as realizeds dried up and sellers came in, led by ULC and wedge activity. Citigroup favors selling 1y5y vs. 5y TIPS BEs.
The 5y auction was very poor after this morning's 2y tailed 0.5bp. Rates rose with realizeds highest in the belly. Gamma firmed back up, led by left
Vols were lower today despite the backdrop of heady realizeds. The ULC rebounded off the lows, however, while the rest of the surface stayed down.
Gamma softened today versus the underlying rally, but sources see the high realizeds as generally supportive of the continued high level of vol.
Sources report more liquidity in the markets. The right is outperforming the left. BNP Paribas likes a 6m1y vs 18m1y low strike receiver trade.
Implieds are back higher as the whippy price action this morning caused bids to quickly come back in. 1y10y was lifted early across a wide bid/offer.
The vol surface is shifting downward amid the underlying UST bull steepening and passage of the event. 1m expiries are down up to 12 normals.
The right side has come in versus the left today. Some of the craziness has eased from the last two sessions. CME SOFR option volumes tops 1M.
As realizeds surpass 30-40bps for the past two sessions, vols have screamed to new highs. Trading was an illiquid wasteland initially, but some flows