Sometimes you just have to smile (but mostly just scream). Volatilities across all asset classes have crashed back towards complacent levels in the last few days as, apparently driven by utter confusion by The Fed, stocks have soared, vol compressed, and risk vanquished. There is, however, one asset that is back at near-record-high vol...
Spot the odd one out...
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(on a side note, we do see FX vol picking up -slowly but surely- at its highest in 16 months)
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And even better... energy companies volatilty has cratered... even as the underlying raw material that drives their entire business model and business risk (no matter how well hedge they think they are) is seeing its volatility soar...
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Smells to us like massively widespread hedging - explaining the cessation of selling- (perhaps even HY traders) have piled into Oil vol (instead of unwinding their energy-sector exposures) as they 'assume' - just as the fed promised - this price drop is transitory (rather than, as Pickens explains, structural and will lead to massive rig count reduction)...
We await the liquidity of thge new year and options maturities to see the decision-making process - roll the hedges (at far greater cost) or unwind energy-sector exposure?
