Options - USD
Gamma was hit down in a directional move to the underlying rally, with 10y tail gamma leading the move, but is now off the lows.
Going into the FOMC, fast money has sold vol and looks for a big payday post-FOMC. JP Morgan hangs onto its long gamma position despite the softening.
Rates have seen smaller realizeds and a tighter range today, but gamma is enjoying a small bounce, led by the left. Citigroup examines skew levels.
Implieds saw further cheapening today, though the moves were not big. The ULC again led, with 1y1y hit down. Barclays examines SDR themes.
The vol surface cheapened further, led by the ULC. 2y1y 2x3 wedges traded along with a variety of outright and switches. Citi is bearish vol.
Implieds are modestly lower amid the underlying rally. 1m1y trades sharply lower. Risk reversals see activity. JP Morgan stays long gamma.
1y1y traded up this morning, but then the bid backed off. Risk reversals see more activity. Citigroup likes 1x2 curve cap spreads.
The vol surface is mostly lower amid the strong double digit bond rally. However, one exception is the ULC, with 1y1y seeing some buying at the lows.
The ULC cheapened up further today, with 6m1y sliding below 100 annualized. Longer tails see switch activity. 3m10y payer skew trades lower.
Sources report some panic driven selling in the immediate aftermath of the consensus CPI print, but vols have seen some buying at the lows since.