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Volatility for EU CO2 Options Signals 'Sell,' CarbonDesk Says
2010-09-09 11:23:20.899 GMT
By Catherine Airlie
Sept. 9 (Bloomberg) -- CarbonDesk Group Plc says
volatility patterns for European Union carbon permit suggest it
may be a good time to sell options.
Implied volatility for at-the-money options expiring in
December was 34.85 percent yesterday, according to an e-mailed
note from London-based CarbonDesk. This is a measure of expected
price swings for carbon allowances based on the premiums paid
for options on those allowances.
Historical volatility, based on a 30-day period was at
21.06 percent, according to Bloomberg data. That's near the
widest difference from the implied volatility figure this year,
according to CarbonDesk, which brokers carbon trades.
"Implied volatility could be trading at such high premiums
due to expectations that EU carbon permits will rise to the end
of the year," CarbonDesk said in the research note. The
difference between the two volatility levels may indicate now is
an "ideal opportunity to sell" options contracts.
Implied volatility can rise when there is poor liquidity.
Total traded volumes on EU carbon permits are up almost 75
percent from last year, the brokerage said. So "liquidity
should have a small impact on implied volatility levels."
For Related News and Information:
Emission market news NI ENVMARKET <GO>
Today's top energy stories ETOP <GO>
European power-markets home page EPWR <GO>
--With assistance from Brian Murphy in London. Editors: Mike
Anderson, Alex Devine.
To contact the reporter on this story:
Catherine Airlie in London at +44-20-7073-3308 or
cairlie@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss on +44-20-7073-3520 or sev@bloomberg.net
