Any explanations for this? Doesn't make any sense considering the near term volatility. Almost seems like everyone is selling front and buying rear month.
Merger related. The Nymex deal is in jeopardy, so it's assumed that the vol is deferred until the SEC acts definitively.
Welcome back Atticus, I knew you couldn't boycott ET for long. It's just too much fun here. http://www.elitetrader.com/vb/showthread.php?s=&postid=1769095#post1769095
this is definitely confusing. If I had to interpret yesteday's news, the merger would only be in possible jeopardy if CME stock didn't recover (since the offer is substantially lower). regardless, that says nothing of near term stock movements. When the stock can move over 200 pts in a few days, it doesn't seem to make sense that short term vol should be 33%. historic volatility from the recent move definitely spiked up.
While I agree, the deal won't be ruled-upon during the Feb cycle, so upside Feb gamma is being sold which kills the strips through parity. I'd imagine there is a downside skew, but haven't looked.
Whats amazing is that the 22 session rolling historical volatility is at 79%. A 5 session historic volatility is at 132%. Even those backdated options must be entirely underpriced. How would you trade this?