“I think the stimulus rally will fade, perhaps in this coming quarter.”
quote is from last month’s column, published 16
April. Since then EUROSTOXX 50, VSTOXX’s reference
index, is off 10%. VSTOXX is up 24% and my suggested trade, OTM
VSTOXX options, are up even more.
feel it’s time to close out.
I describe below, I’m not betting on a turnaround
in the underlying. But a wise man once told me: volatility is
the game theory traded price of a future expectation. While I
expect realised volatility may continue to rally, I believe
I’ve benefitted from the most violent part of the
change in expectations. For a position-taker implied vol. is a
hard call from here.
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