As we begin the second half of July, the market action was anything but that of a quiet summer day. US Equities sold off sharply, US Treasury prices rallied (lower yields) and WTI Crude Oil futures prices were down another nearly 8%. The price action wasn’t lost on the options markets either as implied volatility in the Treasury, Equity and Crude Oil markets spiked. Some notable price and volatility moves include:
The blue line in the top QuikStrike graph below shows the dramatic spike in implied volatility in WTI Crude Oil options today while the orange line provides a nice illustration of the price break. The lower graph shows the 25 Delta Risk Reversal which is a measure of options “skew”. The blue line, which is simply the implied volatility of the 25 Delta Call minus that of the Put, shows that as the price of WTI Crude Oil falls, options sellers are demanding relatively more premium for the Puts than the Calls than we’ve seen in the last 3 months.
We’ll be here all week to report on CME Group products in the midst of the current market volatility.