Event Volatility Calculator - Cpi

By Craig Bewick
JUN 08 2021

It was another fairly quiet day in the US Equity markets as the E-mini S&P 500, Nasdaq-100 and Dow Jones Industrials were little changed on the day while the Russell 2000 was up by about 1%.  Implied volatility in CME Group’s Equity Index options is trading near recent lows.  WTI Crude Oil futures prices were up another 1% to over $70 per barrel while US Treasury prices at the long end of the curve rose, indicating lower yields. 

Bitcoin futures prices were down another 8% today and are approaching a 50% decline since the middle of April.  Implied volatility in the Bitcoin options market is back above over 100% and, according to the 25 Delta Risk Reversal, Puts are trading almost as high relative to Calls as they have in over a year. 

As we look ahead to the rest of the week, the CPI release on Thursday morning stands out as a potentially market-moving economic number release.  To see if the options market was pricing in a futures price move based on the release of the CPI, we took a look at the CME Group Event Volatility calculator which uses the term structure of volatility to try to isolate the impact that the options market is pricing in on the futures price based on an economic number or event.  According to that tool, the options market is attributing a 20 point move in the E-mini S&P 500 futures price and a 110 point move in the E-mini Nasdaq-100 price to the release of the inflation number on Thursday.  The QuikStrike graph below of the volatility curve in the E-mini Nasdaq-100 shows the elevation in volatility in the options expiring Friday relative to the options expiring tomorrow. 

ABOUT THE AUTHOR

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. 

Connect with Craig at activetrader@cmegroup.com

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