BofA Equity Vol Insights - Nervous Vol Still Underprices Election Week
Stressed vol still underprices rare election + FOMC weekUS equity vol has become notably stressed in recent days with geopolitical risks rising and the US election approaching. The VIX trades at a 14-point premium to S&P realized
应用介绍
Stressed vol still underprices rare election + FOMC week
US equity vol has become notably stressed in recent days with geopolitical risks rising
and the US election approaching. The VIX trades at a 14-point premium to S&P realized
vol and is 5-6 points above SPX 1m ATM implied vol, both 98th %ile gaps. Despite this,
the election week implied move of 3.1% for the S&P may still be too low, as it would
have been exceeded in 4 of the last 6 election weeks, none of which featured this year’s
one-two punch of the US election and the FOMC in the same week (last seen in 1984).
We also screen for cheap optionality among names with high sensitivity to both the
election and the Fed (mostly in Oil & Gas, Software, and Financials) and that have the
potential for large election-week moves under the right combination of outcomes. To
hedge the risk US equities are too complacent vs vol markets, SPX Nov 5500/5200 put
spreads offer 8x max payout ratios thanks to historically steep skew, whereas for
convergence lower in the VIX, consider VIX Nov 18/16 1x1.5 put ratios, which offer ~3x
max payouts.
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