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Everything you need to know about the upcoming OPEC meeting

OPEC’s next meeting is scheduled for this upcoming Thursday, November 30th. While the meeting itself is expected to go smoothly, OPEC’s impact has been waning since Russia joined the conversation late last year (see also “Putin Crowns Himself OPEC King“). TankerTrackers is looking for an extension of the relatively successful production cuts that were implemented November 30th of last year, potentially with more nations added to the deal. Money managers have not forgotten the last meeting (25 May 2017) in which the prudent move was to buy the rumor and sell the news.

As of Friday’s close, WTI ended the week +4.0% and Brent finished +1.8%.

Conflicting 2018 forecasts

In their Oil Market Report released earlier this month, the International Energy Agency (IEA) lowered its demand forecast for this year and next. Opposingly, OPEC’s forecast for 2018 was adjusted higher in their November Monthly Oil Market Report. Obviously only one of these predictions can be correct – but one can’t help but wonder – with the political machinations going on in Saudi Arabia – if OPEC’s forecast is somewhat biased.

Systemically low volatility has subjugated oil markets

In spite of the upcoming meeting and unrest in the middle east, oil vol has been steadily ticking down since the middle of the year and is currently at lows not sustained since 2014. Pictured below are the constant maturity volatilities for 7, 14, and 30 day ATM options:

Upcoming options expirations offer unique precision to play the meeting

LO1Z7 expires Dec 1st (underlying CLF8)
LO2Z7 expires Dec 8th (underlying CLF8)
LOF8 expires Dec 14th (underlying CLF8)

Open interest and max pain

Max pain prices are unsurprisingly strictly decreasing. For more information on max pain login to QuikStrike and go to “Market Reports” –> “OI – Max Pain” –> “What is Max Pain?” (in the upper right hand corner).

QuikVol is now included in QuikStrike

QuikStrike subscriptions – paid or free – now come with basic access to QuikVol, our platform for advanced volatility comparisons. You’ll now be able to view 1-month of data for active expirations, historical contracts, and constant maturity securities.

To check it out, login to QuikStrike as you normally would and then click on QuikVol in the upper left hand corner. The interface is the same as QuikStrike; you’ll still have access to your QuikMenu and shortcuts, and you’ll select contracts, views, report options, etc. the same way you do in QuikStrike.

 

Available Views

From QuikVol home you can select one of the following:

  • Active Expirations – analytics for currently trading contracts.
  • Historical Expirations – analytics for expired/historical contracts (active expirations are also available for seasonal comparisons).
  • Constant Maturity – ATM and delta-based skew analytics for constant maturity estimations.
  • Volatility Cones – an aggregation of historical volatilities with which to compare current levels.

Let us know if you have any questions.

Cross Asset Class Volatility Update

In the last few weeks volatility has returned to financial headlines with a vengeance leaving traders checking under their beds for asset bubbles and causing “panic” when VIX traded with a 17-handle for the first time since November 2016. So what’s really playing out in markets?

* note that the volatilities shown are calculated using industry standards based on the type of asset; for example, absolute levels cannot be compared between rates and metals.

Rates

In rates space historical volatility (orange) has picked up but implieds (blue) are lackadaisical. FV/5-yr, TY/10-yr, and US/bond, 30-day constant maturity series are shown respectively below:

 

Here’s a longer dated TY history:

Metals

Gold vol has actually found a bid (with silver and palladium following suit):

While platinum, thus far, is flat:

Energy

Natural Gas implied volatility is the lowest it’s been since 2014:

Although oil is off the lows of the year:

Ags

Vol has come back down in grains after an exciting month although wheat could be picking up again:

Equities

And last but not least, E-mini S&P500 vol has caught a bid:

For a little perspective of where we are currently, here’s a 5-year history of a few constant maturity series:

Like all things, low vol environments eventually come to an end, but low vol by itself doesn’t “trigger”  eruptions. Claiming that vol can uptick ahead of an event isn’t exactly going out on a limb. But I’m sure they’ll tell you they told you so next week.