A Look At Precious Metals Skew

By Craig Bewick
SEP 23 2020

US Equity Indexes began the day mostly higher but sold-off and wound up declining rather sharply, with the Nasdaq leading losses, down over 3% on the day.  Not surprisingly, implied volatility rose in the Equity Index options markets as 30-day vol in the E-mini Nasdaq-100 options rose from about 31.5% to 33.5% and that in the E-mini S&P 500 options rose relatively more, from 23% to 25%.  US Treasury futures prices actually fell slightly with the stock market price decline (oftentimes we see a rally in US Treasury prices associated with such stock sell-offs) and the US Dollar was higher versus most major currencies. 

Gold and Silver futures prices fell sharply today as well (we often see Gold rally with these kinds of stock market sell-offs).  In fact, since September 18th, Gold futures prices are down about 5% and Silver futures prices are down by about 15%.  While volatility has fallen in the options markets in both of these precious metals, the more significant move may have been in the relationship between Calls and Puts.  On September 18th, the 25 Delta Calls were trading at an implied volatility of about .25% higher than Puts in Gold and .75% higher in Silver.  Today, the Puts were trading higher in both metals; in Gold by .88% and in Silver, by 2.8%.  The QuikStrike graphs below depict this relationship using the 25 Delta Risk Reversal. 


Craig Bewick has spent 25 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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