Event Volatility Analyzer - Us Presidential Election

By Craig Bewick
OCT 20 2020

It seems US Equity markets are again hanging onto every word regarding further COVID-19 stimulus packages.  Stocks were higher to begin the day then rallied further after Speaker of the House, Nancy Pelosi, around midday, suggested a deal could be done by the end of the day.  Implied volatility in the CME Group Equity Index options declined a bit but remains elevated versus the 3-month average.

It was an otherwise fairly quiet day in CME Group markets though the US Treasury futures prices were somewhat interesting. The 2-Year Treasury note was essentially steady on the day while the Ultra T-Bond (the closest CME Group product to the cash 30-Year on-the-run issue) was down by nearly 2.25 points in a bit of a steepening move. 

As we get closer to the much-anticipated US Presidential election, we took a look at the CME Group Event Volatility Calculator which seeks to isolate the impact of an economic release or event on the futures price by looking at the term structure of volatility in the options market.  Currently, the tool is showing a 109 point move in the E-mini S&P 500 futures price based on the option volatility in the November 4th options.  The QuikStrike graph of the term structure of volatility shown below illustrates nicely the elevated volatility levels in the 11/4 expiration, the day after the election. 

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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