Price Vs Volatility - E-Mini Nasdaq-100

By Craig Bewick
SEP 02 2020

US Equity indexes were broadly higher today and they did it with the shares of Apple and Tesla declining in price after both have had tremendous rallies as of late.  Once again though, even in the middle of fairly strong price rallies, the volatility levels in the options markets continued to rise.  Perhaps in advance of Friday’s employment report, but it is interesting to note the positive correlation between price and options implied volatility. 

Other notable price moves in CME Group products include WTI Crude Oil futures which were down by over 3%, Gold prices down by about 1.5% and Silver, which was down by about 3.5%.  Implied Volatility in the Gold and Silver options markets has normalized somewhat, but if we look at 12 months of historical data, Silver implied vol remains slightly above a 1-standard deviation move. 

In the QuikStrike image below, we graphed the price and 30-day volatility in the E-mini Nasdaq-100.  In order to illustrate the correlation between price and volatility we drew (by hand, nothing scientific and just for illustration) rough estimates of trend lines.  As you can see in the yellow and red lines, 6 months ago, price and correlation were negatively correlated, as we often see.  In June, the price continued higher while the volatility level moved up and down but within a relatively tight range.  The thicker green line shows the mostly positive correlation between the two over the last few weeks. 

Speaking of the August Employment report, scheduled to be released on Friday, remember that CME Group launched Micro E-mini Options on the S&P 500 and Nasdaq-100 this past Sunday night and the first expiration will be on Friday.  We saw nearly 7,000 contracts (combined) in the new Micro options trade today as of the writing of this column. 

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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