Implied Volatility Surprisingly Low Before Russian Elections

Russian presidential elections are set for Sunday, but options markets are complacent: RTSVX - Russian Volatility Index is near multi-month lows at 33.04, and similarly ATM volatility in RSX options. Front-month futures on RTSVX that are expiring next Wednesday, March 7 are trading just barely above the index, closing today at 33.25. If I had access to the contract I would certainly buy at this level - upside is certainly much higher than the downside in case election turns out to be an event.




















One interesting feature that I see on the chart is frequent over-reaction (and occasional under-reaction) of RSX vol compared with RTSVX. I do not know enough details about differences between the indexes to see if there a trading opportunity.

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