Key Takeaways With Craig

By Craig Bewick
AUG 06 2020

US Equity indexes spent most of the day trading nearly unchanged from yesterday’s levels as the market awaits a couple of big developments; the release of the July employment report by the Department of Labor tomorrow morning and a potential agreement from Capitol Hill on another coronavirus relief package. 

News from other CME Group markets include:

  • WTI Crude Oil futures prices rallied and are trading at over $42 per barrel.  30-Day implied volatility (at least according to conventional options pricing models) was trading at about 35% yesterday; the lowest levels we’ve seen since early February
  • US Treasury futures rallied today, indicating lower yields; implied volatility in the 10-Year Treasury options continues to trade at historically low levels
  • Gold and Silver futures prices continued to move higher and the already high implied volatility levels that Dave Lerman talked about yesterday continued to move higher still.  Moreover, even as Silver futures prices continue their massive rally, the Calls continue to get bid versus the Puts.  In fact, the implied in the 25 Delta Calls is trading at about 14% higher than the Puts.  Over the last ten years, on average, the Puts traded at a .06% premium to the Calls, underscoring how extraordinary this skew measure is

Given tomorrow’s Jobs number that we referenced earlier, we took a look at the CME Group Event Volatility Calculator available on its website to get an idea of what kind of move the options market was pricing in to the futures price.  This tool uses the term structure of volatility (different options expirations tend to have different implied volatility levels) to try to isolate the impact that the options market is pricing into the futures price, of a given economic release (like the jobs number).  As you can see in the image below, the E-mini Nasdaq-100 options market is currently pricing in a futures price move of about 40 points in either direction from the Jobs number release.  Remember, implied volatility provides no information regarding the direction of a potential price move; simply the magnitude that the options market is pricing. 

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. 

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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