Yesterday, we used the CME Group Event Volatility Analyzer to get an idea of the move the options market was pricing into the E-mini S&P 500 futures based on the September Employment report. Little did we know at the time that, even though the number of jobs created in September was significantly below expectations, the news of a positive COVID-19 test on President Trump would overshadow that report. Equity Index futures sold off overnight on the news and the cash equity market opened lower, but turned mixed around midday. Ultimately, the indexes closed mostly lower, though the small-cap Russell 2000 managed a slight gain.
Perhaps unsurprisingly, implied volatility in the Equity Index options, particularly the E-mini Nasdaq-100, increased as prices fell while Puts gained relative to Calls as measured by the 25-Delta Risk Reversal. The QuikStrike graphs below provide a nice illustration of these moves.
Rather than recap the week (since we recapped the month of September in Wednesday’s issue), we thought the volatility move in the Nasdaq-100 options provided a nice opportunity to showcase a new product CME Group will be launching this Sunday night, the VOLQ future - landing page linked here. This future, based on the Nasdaq-100 volatility index, provides another way for market participants to trade at-the-money volatility on this leading global benchmark equity index. With this launch, CME Group customers will be able gain exposure to Nasdaq-100 volatility with E-mini Nasdaq-100 options, Micro E-mini Nasdaq-100 options and the new VOLQ futures product. Underscoring the move in volatility that we talked about above resulting from the recent news cycle, the VOLQ index has moved as much as 10% higher from Wednesday’s close, making this a very interesting and opportune time for the product launch!
Have a great weekend and we’ll see you on Monday for the real start to the October trading month which is historically among the most volatile on the calendar..