Key Takeaways With Craig

By Craig Bewick
SEP 22 2020

Despite there being no lack of potential volatility-inducing news including the potential for increased lockdown measures in Britain, continuing debates over another Corona virus stimulus package and of course the looming US Presidential election, the markets were relatively quiet today.  Due to scheduling conflicts this afternoon, we’re writing the Key Takeaways section a bit early, but at midday US Equity Indexes were mixed, CME Group Agricultural, Metals and Energy products were little changed and US Treasury prices were higher throughout the yield curve, indicating lower yields. 

In the absence of major market price or volatility moves, we took the opportunity to showcase a QuikStrike tool called the “Cross Correlation” tool.  However, while you oftentimes see correlation charts of price returns, today we’ll look at how different products are correlated with one another on an implied volatility basis.  We found some interesting differences when comparing the past three months to the past 12 months.  Specifically,

  • Implied Volatility in the E-mini S&P 500 and Nasdaq-100 options had a positive .90 correlation with one another over the past 12 months; this falls to .76 over the past three months. 
  • The Dow Jones and S&P 500 implied volatility correlation falls from .97 to .83 comparing those two time periods.
  • Gold implied volatility over the past 12 months had a positive .39 correlation with the E-mini S&P 500; this fell to .21 over the past three months.
  • Silver went from positive .28 to near zero implied volatility correlation with E-mini S&P 500 implied volatility

The image below is the correlation of implied volatility in some major CME Group products over the last 3-months. 

 

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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