US Equity Indexes began the day broadly lower but wound up mixed as the Dow Jones Industrials recovered early losses to close near steady while the Nasdaq ended lower by about 1%. US Treasury futures prices were down slightly at the longer end of the curve and the US Dollar gained versus most major currencies. CME Group commodity markets were active again:
With signs of inflation evident and the debate regarding whether it is “transitory” or not continuing, the market will likely be closely watching the May Employment report, scheduled to be released tomorrow morning, for signs of economic strength or weakness.
Ahead of that release, we took a look at the CME Group Event Volatility Calculator which seeks to estimate the amount of price movement in the Futures contract that the options market is attributing to an economic event or number release. The tool uses the term structure of volatility or, in other words, the difference in implied volatility in the option expiring just after a given event versus the implied volatility of more deferred options. According to the tool, (which is available on CME Group’s website) the options market is pricing in a 118 point move in the E-mini Nasdaq-100 futures and a 26.5 point move in the E-mini S&P 500 futures attributable to the Employment Report. We’ve included the QuikStrike image of the term structure of volatility in the E-mini Nasdaq-100 which nicely illustrates the elevated level of implied volatility in the option that expires tomorrow.