Revisiting E-Mini Nasdaq-100 Options...

By Craig Bewick
JUL 14 2020

US Stocks were broadly higher today, though the Nasdaq alternated between positive and negative for a good part of the trading day.  Earnings season got underway with several large banks reporting mixed results.  Implied volatility in the E-mini Nasdaq-100 options, which we’ve reported extensively on lately, was near steady on the day. 

Other CME Group markets were relatively calm today as WTI Crude Oil, Gold and Grains futures prices were all near steady on the day.  We did see some action on the long end of the US Treasury futures curve as prices in the US Bond future were up over half a point and the Ultra T-Bond was up by nearly 1.5 points.  As we’ve talked about here recently, one popular way that traders like to trade interest rates is by trading different parts of the US Treasury curve against each other, effectively trading the shape of the curve rather than a purely directional position at one specific duration point.  To that end, CME Group just re-launched an improved 3-Year Treasury Note futures contract that will give market participants another point on the yield curve on which to take a position.  In just the second full day of trading, we’ve seen nearly 7,000 contracts trade on CME Group’s central match engine, Globex (at the time of this writing).  Looking at the implied volatility levels on the Treasury curve, we see a bit of a divergence in the shorter vs. longer end; the 30-day implied volatility in the 10-Year note at 3.25% is trading substantially below the 2-year closing average of 4.3% while the US Bond volatility at 8.5% is right at the average we’ve seen over the last two years. 

Revisiting the E-mini Nasdaq-100 options, we used the QuikStrike Vol2Vol curve to take a look at where the action in the E-mini Nasdaq-100 option that expires on Friday was today.  As we’ve discussed in the past, this tool allows a user to see a picture of not only the implied volatility levels but also in which Calls and Puts we saw volume on a particular day.  As you can see in the image below, Puts outnumbered Calls by more than 3 to 1 and we saw heavy volume in the 10400 Put that trades at about a -26 delta.  Further, based on the current implied volatility level, the options market is pricing in a one standard deviation move of about a 370 points in the futures (in either direction) over the next 3 days. 

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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