Investors are taking advantage of the upward-sloping equity volatility curve by buying cheap short-dated vol and selling more expensive longer dates. Dealers said the trade is appealing because the November dates investors have been buying cheaply cover earnings season and the more expensive December dates they are selling cover the holiday period, when volatility tends to drop off.
While some traders said equity index volatility is fairly priced and there is no reason for curve trading to be exciting right now, others said the trade is attractive to investors apprehensive about short-term inflation and real estate troubles. "There's still juice left in that trade," said Robert McAdie, global head of credit strategy at Barclays Capital in London, on a conference call with market participants last week.
