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Global Diversified Macro Fund

First Quadrant, L.P.
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First Quadrant Insights:  Options Outlook Q1:  Steady As She Goes

January 13, 2021

posted by Global Diversified Macro Fund
506

The options structure can be a useful tool for identifying market participants’ outlook.


In 2020, global equities followed a sharp V-shaped pattern. Even while the cash market staged a strong recovery, implied volatility in the options market remained well above historical averages. We last checked in on October 30th, 2020 (“Options and the Presidential Election”), using the S&P500 index options to see what the market thought about the November 2020 election. At the time, the options market seemed to be anticipating a spike in volatility right around the election and then a continual decline.


In hindsight, the options market was correct. Volatility started to fall almost immediately after the election, and continued to decline through year-end, even with ongoing litigation surrounding the election and the forthcoming Brexit.


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ALL ALPHAMAVEN CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. CONTENT POSTED BY MEMBERS DOES NOT NECESSARILY REFLECT THE OPINION OR BELIEFS OF ALPHAMAVEN AND HAS NOT ALWAYS BEEN INDEPENDENTLY VERIFIED BY ALPHAMAVEN. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THIS IS NOT A SOLICITATION FOR INVESTMENT. THE MATERIAL PROVIDED HEREIN IS FOR INFORMATIONAL PURPOSES ONLY. IT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY INTERESTS OF ANY FUND OR ANY OTHER SECURITIES. ANY SUCH OFFERINGS CAN BE MADE ONLY IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH IN THE INVESTMENT'S PRIVATE PLACEMENT MEMORANDUM. PRIOR TO INVESTING, INVESTORS ARE STRONGLY URGED TO REVIEW CAREFULLY THE PRIVATE PLACEMENT MEMORANDUM (INCLUDING THE RISK FACTORS DESCRIBED THEREIN), THE LIMITED PARTNERSHIP AGREEMENT AND THE SUBSCRIPTION DOCUMENTS, TO ASK SUCH QUESTIONS OF THE INVESTMENT MANAGER AS THEY DEEM APPROPRIATE, AND TO DISCUSS ANY PROSPECTIVE INVESTMENT IN THE FUND WITH THEIR LEGAL AND TAX ADVISERS IN ORDER TO MAKE AN INDEPENDENT DETERMINATION OF THE SUITABILITY AND CONSEQUENCES OF AN INVESTMENT.