25 April 2018 by lberuti
The main event in synthetic credit today was the fact that electronic trading on indices was made difficult on the morning by a system failure. It did not prevent decent volumes to eventually go through though - you can find them on OTC Streaming< /a> -, but the moves were underwhelming. Despite the recent downward pressure on equities, credit indices have been slow to react and did so in a very orderly manner. That is apparent in the options market where implied volatility closed the session slightly lower. Some carry hungry investors are still selling options to collect premium. The other side of the trade is taken by people buying options outright to a certain extent - but with far out of the money (OTM) strikes -, but mainly by people buying payer spread (PS) structures – they buy a first payer with a not too far from the money strike, and sell a second payer with a more out of the money strike -. If some investors are focused on downside protection, they are effectively looking for low conviction ways to protect themselves against further weakness – using PS - or for protection against much larger moves – using OTM options -.