Options Markets Paint An Interesting Picture

By Craig Bewick
JUL 21 2020

US Equities were mixed again today as the Nasdaq spent most of the day in the red while the Dow was up.  In the last hour of trading, all the major US indexes sold off with the Nasdaq closing down about 1% and the S&P 500 and Dow finishing nearly steady.  Implied volatility in CME Group index options was little changed.

Other CME Group markets were particularly more active today as WTI Crude Oil futures prices were up by over 2% to about $42 per barrel, the US Dollar was lower against most major currencies and US Treasury futures were up slightly at the long end of the curve.  Metals, however, kind of stole the show today as Gold futures prices were up by about 1.5% while Silver rallied 7%.  Last week, in conjunction with CME Group’s Gold trading presentation, we talked extensively about the precious metals futures and options markets including the relationship between Gold and Silver.  With today’s rally in Silver, it is now as expensive relative to Gold as it’s been since the beginning of January, as you can see in the top graph below, powered by QuikStrike (Gold px / Silver px). 

The options markets paint an interesting picture as well.  While implied volatility increased and the Calls were bid versus Puts in both metals, this effect was much more dramatic in Silver.  As you can see in the middle QuikStrike graph below, 30-day implied volatility, at 44%, has risen above a one standard deviation move based on the last 2-years.  The bottom graph shows that, with today’s move, Calls are now trading 10% over Puts which is higher than they’ve been in two years. 

ABOUT THE AUTHOR
Craig Bewick has spent 20 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

After 8.5 years with WH Trading LLC, Craig returned to CME Group as the Director, Client Development and Sales, working to educate and promote futures trading. Craig currently writes for InFocus Options Corner.

Connect with Craig at activetrader@cmegroup.com
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