Mean reversion is working! Except there is no one left to take advantage… Implied vol in WTI options has dropped sharply as futures move mostly sideways… At the money, second nearby options (depicted in the chart through Aug 7 settle) settled down to 35.0 which is still about 10 points above the 20 day historical measure and close to the long term average of around 32% (since 1986, not counting this year’s upheaval) … Average daily volume is extremely low with 68,219 trading in July compared with ytd 133,888… My bias is that commodity markets are inherently unstable, I’m not a fan of mean reversion strategies…
by Jim Colburn Leave a Comment
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