Wednesday, December 2, 2009

Equity vol getting cheaper vs. credit

Equity volatility continues to trade cheap to credit. The chart below compares VIX to the investment grade CDX spread.





Except for the Dubai driven spike, equity vol may be disconnecting from credit and will continue to drift lower. At some point a spread trade will become interesting - shorting investment grade credit against long equity options (or VIX futures).


SoberLook.com
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