FICC Focus VIX, Rates Vol, Gold With Susquehanna: All Options Considered
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Feb 21, 2025 In this engaging discussion, Chris Murphy, Co-Head of Derivative Strategy at Susquehanna, delves into the current state of financial market volatility and the unique behaviors of hedge funds. He highlights the low correlation in stock markets and shares strategies for capitalizing on volatility in individual stocks and commodities. The complexities of VIX call options and the recent rally in gold are also examined, providing insights into broader market expectations influenced by economic factors and Fed policies.
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Sector-Specific Volatility
- Despite low overall S&P 500 volatility, significant sector-specific volatility exists.
- This is due to diverse reactions to news within different sectors, creating opposing forces on the index.
Low Correlation and Alpha
- Low correlation among stocks suppresses index-level volatility.
- The market is pricing in persistent low correlation, offering alpha generation through thematic investing.
Call Spread Strategy
- Consider using call spreads to capitalize on high volatility in out-of-the-money calls.
- This strategy is particularly attractive when the initial large price move has already occurred.