EU Carbon Price Drop Means December Crash Less Likely: Redshaw

By Mathew Carr
(Bloomberg) — A EU10/ton decline in the EU carbon allowance price since Sept. has cut the risk of an options-related crash next month, according to Redshaw Advisors.
* “Chances of a carbon price meltdown in December are diminished,” Redshaw’s Tom Lord says in note on website
* “Lower prices mean there are fewer call options in-the-money and thus less risk of a long-position washout”
* Low auction volumes coming as Germany has last sale this Friday until late 1Q, and Brexit to probably interrupt British
* The recent price retreat will have shaken out some bullish speculative positions, “thus taking out some of the self-
reinforcement potential of the declines”
* “Option expiry is still a long way off and prices may move higher in the meantime”