EMISSIONS: UKAs Volatility Rises To One-week High

UKA Dec25 implied volatility hit a one-week high as the market anticipated increased price swings amid ongoing news about potential EU-UK ETS linking.

• EUA Dec25 implied volatility reached 46.2% this week compared to a low of 44.2% when UKAs hit a near two-month low last week.
• The ICE EUA Dec25 25 delta call-put volatility skew narrowed to the lowest level since early March at -1.21% this week from the -3.77% in early March.
• Recent UKAs volatility is driven news and comments toward an EU-UK ETS relinking, despite no official decision was released.
• UKA sentiment also influenced EUAs, with correlation between EUA/UKA tightened 0.72 this week compared with the year-to-date low of 0.30 in Jan.
• UKA Dec25 options is due to expire on 10 Dec, with the current aggregate open interest at 10k for call contracts, and 9.5k for puts. Put/call open interest ratio is at 0.93. The largest call volumes stood at 3.7k at the £50/ton CO2e strike, while put volumes sit at 3.9k at the £35/ton CO2e strike.
• UKA Dec25 is tracking a weekly gain of nearly 5%, while EUAs gaining and nearly 3%.
• EUA DEC 25 down 1.05% at 72.24 EUR/t CO2e
• UKA DEC 25 down 0.39% at 46.36 GBP/t CO2e