A recent Bloomberg article discusses a traded touted by SocGen to take advantage of higher gold volatility ahead:
“Societe Generale SA has come up with a way for investors to profit from the U.K.’s referendum on whether to remain in the European Union whatever the outcome: bet on a jump in gold volatility.”
However, there is no mention of how much expected volatility is already built into the market. Buying volatility ahead of a major event like the Brexit vote or like an OPEC meeting requires two calculations. Vol expectations post the event must be weighed against vol expectations built into the market. Here is a barchart.com look at gold including implied volatility:
Implied volatilty for the August gold contract has already moved higher from it’s lows of around 14% in June to a recent 20% high… Some traders may already have exited a long vol trade, not waiting for the actual vote to take place… My problem with the otherwise interesting article is that there is no discussion as to how much of their trading idea is already baked in… Here is the link: http://www.bloomberg.com/news/articles/2016-06-22/whatever-britons-decide-bet-on-gold-price-volatility-to-profit
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