I do trade oil and VIX futures. This is competent advice, close to what I would have written if I’d found the time. I don’t expect much reaction to this news, but if I did, I’d short March oil futures, maybe hedging by buying September oil futures.
You are right. Hedging with a long term future makes it a very targeted bet on “the real economy, especially travel halts in X months” and this is exactly what you can expect from COVID gone bad. You can see if this is priced in by comparing spring and autumn futures prices: March vs September or I would rather say May vs December. I took a look and the market is in backwardation (longer term is cheaper than short term)! The markets expect everything to be fine, it doesn’t look like COVID disaster is priced in.
I would say that it looks like a pretty good trade. Sell May, buy Dec, hold till May expiry (or till the shock is priced in) and then close both.
Little reaction to the new strain news, or little reaction to new strains outpacing vaccines and getting a large chunk of the population over the next several months?
I do trade oil and VIX futures. This is competent advice, close to what I would have written if I’d found the time. I don’t expect much reaction to this news, but if I did, I’d short March oil futures, maybe hedging by buying September oil futures.
You are right. Hedging with a long term future makes it a very targeted bet on “the real economy, especially travel halts in X months” and this is exactly what you can expect from COVID gone bad. You can see if this is priced in by comparing spring and autumn futures prices: March vs September or I would rather say May vs December. I took a look and the market is in backwardation (longer term is cheaper than short term)! The markets expect everything to be fine, it doesn’t look like COVID disaster is priced in.
I would say that it looks like a pretty good trade. Sell May, buy Dec, hold till May expiry (or till the shock is priced in) and then close both.
Wow, it really, really worked out) I want my prestige points)
Good job!
Little reaction to the new strain news, or little reaction to new strains outpacing vaccines and getting a large chunk of the population over the next several months?
Little reaction to the likely spread of the new strains.