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Put Skew Covers Downside Risks

OIL OPTIONS

Puts strengthen as Brent implied volatility back around 50%.

  • Brent ATM implied volatility is near 50% having fallen toward 40% earlier in June. Uncertainty over both oil supply and the economic risks to future demand are resulting in large price swings and high intraday volatility.
  • The vol skew has gradually trended back to puts over calls since the start of March. Dec22 25 delta calls had spiked to a premium of approximately 5% over 25 delta puts back in March but now puts are trading at a 3.5% premium to calls. The gradual increase in economic risks has driven the move as outright futures have traded lower despite the continuation of global supply disruptions.

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Puts strengthen as Brent implied volatility back around 50%.

  • Brent ATM implied volatility is near 50% having fallen toward 40% earlier in June. Uncertainty over both oil supply and the economic risks to future demand are resulting in large price swings and high intraday volatility.
  • The vol skew has gradually trended back to puts over calls since the start of March. Dec22 25 delta calls had spiked to a premium of approximately 5% over 25 delta puts back in March but now puts are trading at a 3.5% premium to calls. The gradual increase in economic risks has driven the move as outright futures have traded lower despite the continuation of global supply disruptions.

Keep reading...Show less