Equity derivative traders in Asia have noted the resurgence of volatility buyers in the near historical-low level market in recent weeks. "We're starting to see more two-way traffic," said James Rodríguez de Castro, managing director in global equity-linked products at Merrill Lynch. He said the increased trading activity has been largest in Korea and Hong Kong.
OTC straddle options positions are proving to be the most common trade, but officials noted there is also some interest for variance swaps. "Straddles are a good way in certain Asian markets to take a view where vols are low but there is a slightly upwards trend in stocks," explained de Castro. Officials said the activity is being driven mainly by hedge funds.
