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Ol’ Wisco | The option markets have made a few interesting moves prior to the Sep. 12 report. Implied vol has been slowly rising meaning traders expect things to get slightly more choppy. In soy the horizontal skew has moved from a slight forward skew to a slight reverse skew (front expiry IV higher than farther out expiry). This makes it seem as though the market wants to flesh out whether we have made a bottom or find a new one sooner rather than later. Also ATM and NTM vertical skew has moved to a .75% forward skew after being flat most of the last 2 months. (From a purely statistical value sense this means that calls are carrying a slight premium to puts in those strike ranges) This shows a little bit of bullish sentiment. The markets are expecting about a 15% chance we go above 986.5' or below 934.5'. It seems as though if the print is viewed as bearish that there could be a lot of air let out of this thing. I have synthetic straddles and strangles on as a vol trade and as an effective stop loss on hedges. | |
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Option markets……
