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J.P.Morgan: Initiate Long Gamma In 10-Year Tails

US SWAPTIONS

J.P.Morgan note that “with liquidity conditions likely to remain poor for some time and thereby supporting the conditions that have caused long straddle positions to outperform in recent weeks, implied volatility on longer tails having pulled back to lower levels, and longer tails increasingly delivering greater volatility than short tails, we turn bullish on gamma in longer tails”

  • They therefore recommend buying $100mn notional 6Mx10Y swaption straddles. This trade assumes active delta hedging every business day.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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