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TME sees the chase back on.
Convexity Is Cheap
Convexity remains cheap, but the surface is sending an interesting message. Outright SPX vol is still depressed, even as upside calls are increasingly bid relative to puts and downside protection has collapsed. That leaves attractive asymmetry on both sides: cheap outright vol for upside exposure, call spreads to monetize the relatively rich upside wing, and unusually cheap puts for protection.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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