Premium"The Age Of Idiosyncratic Risk": BofA Says Options Are Underpricing Megacap Earnings Blowups, While Europe Overpays
Index vol may be napping, but individual stocks have rarely been this jumpy.
That is the message from the latest Global Equity Volatility Insights note from BofA's derivatives team led by Benjamin Bowler, titled "The age of idiosyncratic risk" (available to pro subs), which finds that single-stock fragility remains a defining feature of equity markets heading into year-end. The numbers: 3-month ATM weighted-average stock vol is currently 38% for the SPX Top 50, roughly 2.5x the equivalent index vol, and 31% in Europe, about 1.8x the SX5E.