And just like that, volatility has returned, in spades, to the US Equity markets. The four major US Indexes were down by about 3% as all of the uncertainty of which we’ve spoken recently seems to be reflected in stock prices. Not surprisingly, implied volatility in the Equity Index options markets at CME Group has spiked as well.
Equity prices weren’t the only ones moving at CME Group today:
The top QuikStrike graph below depicts 10 Years of Price and Implied Volatility data in the E-mini S&P 500; the lower shows the 25 Delta Call volatility minus the 25 Delta Put volatility. As you can see, with today’s moves, ignoring the spike we saw during the initial economic shutdowns in March, implied volatility is close to the highest levels we’ve seen in 10 years or since the mortgage default-driving financial crisis in 2009. And, somewhat predictably, Puts are trading as nearly as expensive relative to Calls as they have over the same time period, again, ignoring the March, 2020 volatility.
Tomorrow, we have all of this to look forward to PLUS earnings reports from some of the biggest companies in the Nasdaq after the bell so stay buckled up.