Super Tuesday Hedging Already Showing Up in Volatility Curves
- Anxiety seen in cost of near- versus long-term derivatives
- VIX futures curve inversion has been a harbinger of turmoil
Photographer: Daniel Acker/Bloomberg
This article is for subscribers only.
Alarm bells are sounding in volatility markets amid a set-up that traders warn has some resemblance to the period preceding the February 2018 risk rout.
The signal is flashing from contracts tied to the VIX, the benchmark gauge for turbulence in U.S. stocks derived from options in the S&P 500. Through those tea leaves, a build-up of trader anxiety is taking shape in the relative cost of near-term versus long-term derivatives. One explanation is the large number of presidential primaries in early March.