It seems all the uncertainty that we’ve been referencing here in the Key Takeaways section over the last couple of weeks finally hit the US Equity Index markets today as all major indexes fell by between 1.6% and 2.5% on the day. With Coronavirus cases rising around the globe, a lack of a stimulus plan from Capitol Hill, the US Presidential election a week from tomorrow among other things, US Equity Index futures prices sold off overnight and continued lower throughout the day, though they closed well of the day’s lowest levels with a late afternoon rally. Not surprisingly, we saw a relatively large jump in implied volatility in the E-mini S&P 500 options markets which you can see in the blue line in the top QuikStrike graph below (the orange line represents the price) and the Puts gained relative to the Calls as you can see in the lower graph which represents the implied volatility of the 25 Delta Calls minus that of the Puts.
We’ve also written fairly extensively about US Treasury futures markets lately and specifically about the rise in implied yields. With today’s stock market sell-off US Treasury futures prices fell, resulting in lower yields. The implied yield in the Ultra T-Bond, the closest product CME Group lists to the on-the-run cash bond, fell by about 6 basis points today. In the US Treasury options markets, we saw volatility rise slightly and the Calls bid over the Puts according to the same 25 Delta Risk Reversal we mentioned above with respect to the Equity Index options.