Charting The Bernanke Put

The below chart of implied vol skew from UBS is the closest thing we will get to visualizing the now prevalent "Bernanke put" on the stock market. Also, the commentary from UBS is pretty much all we need to know that even the smallest decline in the market indicates that something is very wrong at the Fed, which has now made any stock drops implicitly impossible.

As we mentioned in our report out earlier this week, These Go to 11, many investors have interpreted a more engaged Fed as providing put protection under the equity market, decreasing the potential for adverse outcomes.


This dynamic can be observed most directly by looking at the option market’s implied volatility skew, which measures the difference between the cost of puts and calls. As illustrated below, this declined significantly following the Fed’s hint at additional QE on September 21. Why buy downside protection when the Fed has done it for you?


Move over "Greenspan put." Your successor has outdone you by a factor of 600 billion, and soon - 4+ trillion.