Despite Andy Hall's wish hope forecast guess statement that "the bottom is in," for crude (and oil analysts unicorn-like forecast of $47 by year-end), it seems oil options traders disagree significantly.
The cost of protect against downside risk is the highest it has been in a year, despite underlying oil prices being at 8-week highs
(chart shows implied vol spread between Dec 2016 Crude Puts vs Calls +/-1.5 Sigma)
Today has seen Put vols jump from 51.33 to 56..2 as Call vols fell from 49.63 to 47.6, leaving options traders paying the most since Feb 2015 to protect against lower prices by the end of the year, compared with the cost of hedging the risk of more expensive crude.
As Bloomberg notes, as U.S. production shows continued resilience to low prices, Iran returns to global markets and Saudi Arabia keeps pumping, options markets show the threat of "lower for longer" prices hasn’t disappeared.
via Zero Hedge http://ift.tt/1OQPelk Tyler Durden