Hedge funds rev up short-vol trade in zero-day options
Firms are capping exposures to avoid a rerun of 2018’s ‘Volmageddon’ unwind
Hedge funds are once more gunning their engines on the short-volatility trade – this time in zero-day options (0DTEs) – and with a downside limit.
The strategy has led to outsize losses in longer-dated instruments in the past – notably during the so-called Volmageddon crisis of 2018, sparked by an industry-wide unwind of short-vol exposure.
But this time, funds are adding caps to limit potential losses. And in zero-day options, the available premium is higher, making the short-vol strategy more
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Derivatives
Zero-day hedging takes root in new asset classes
Option users move beyond equity indexes in search of cheaper, sharper hedging tools
CVA swap: a new type of capital relief trade
Dmitry Pugachevsky, Quantifi, discusses the emergence of the CVA swaps market
From ‘glut effects’ to ‘greedflation’: the factors shaping derivatives markets in 2024
Societe Generale and Risk.net held the ninth edition of their annual flagship Derivatives Conference in the iconic SG Towers at La Défense. Usually hosted in London, the event was co-sponsored by the CME Group and took place in Paris for the first time,…
The unknown risk on the flip side of the basis trade
US mutual funds have amassed record notionals in Treasury futures that in some cases exceed their AUM
BNP takes top forwards spot with US mutuals
Counterparty Radar: French bank ousts Bank of America to lead the table for the first time
Asset managers offer tailored LDI to smaller pension schemes
Minimum AUM for customised hedging slashed from around £400m to £75m
US mutual funds piled into call-selling strategies in Q1
Counterparty Radar: BlackRock, Franklin Templeton and T Rowe Price among the managers who added to single-stock positions
Like your CSA dirty? It’ll cost more
Buy-side firms have to pay up if they want to post corporate bonds to their dealers, but prices vary
