OptionMetrics Blog

May 4, 2020

Tail Risk in the Energy Sector

By Garrett DeSimone, PhD

The energy sector has been hammered in the combined wake of OPEC’s failed output deal and plummeting demand for oil as a result of Covid-19. Oil futures have gone negative, to establish a whacky super contango precedent. This crash in prices is a death blow for highly leveraged oil companies. The bankruptcy dominoes have already begun to fall, with Whiting Petroleum and Diamond Offshore earlier this month. A common fundamental approach to determining long term viability in this environment is breaking down accounting metrics, such as Debt-to-Equity or EBIT/Net Interest.   More»

April 22, 2020

Gamma Traps and Dealer Imbalances

By Garrett DeSimone, PhD

The market has seen some wild moves over the last month, which has drawn parallels only to the price action at the onset of the Great Depression. Several pundits are willing to blithely attribute this environment to some form of derivatives dealer behavior with minimal economic intuition. The goal of this introductory post is to enlighten readers on some derivatives mechanics at play here using some (light) quant intuition.   More»