Wti Crude Oil Implied Volatility Rises

By Craig Bewick
MAR 25 2021

After a couple of days in the mountains during which I was fairly unplugged, I came back yesterday to find long term interest rates had come down a bit, as had equities, but neither in dramatic fashion.  Today, US Treasury futures prices at the long end of the yield curve began the day positive (lower rates) but reversed course and wound up just slightly lower while Equity Index futures prices were lower around midday but wound up mixed as the Dow, S&P 500 and Russell 2000 were all positive while Nasdaq futures prices declined.  In the options markets, implied volatility in the Equity Indexes options is nearly unchanged from last Friday and down a bit in the longer term Treasury options at CME Group.

Commodity products were relatively active today; some highlights include:

  • Corn and Soybean futures prices were both down by about 1%.  Corn implied volatility rose from about 32% to almost 35%.  Wheat futures prices were down by 2% though implied volatility was near steady on the day.
  • WTI Crude Oil futures prices were down by nearly 4.5% and implied volatility in the options markets spiked from about 41% to 51% while the Puts were bid versus the Calls as indicated by the Risk Reversal. The QuikStrike graphs below nicely illustrate the volatility and skew moves in WTI Crude Oil options markets relative to the last 3 months. 
  • RBOB Gasoline futures prices dropped by about 3.5%
  • Natural Gas futures prices were up by about 2% though implied volatility in the options remains near the low end of the 6-month range
  • Copper futures prices were down  by about 1.75% but were down by almost double that earlier in the day.  Implied volatility is down from the levels we saw at the beginning of March but remains elevated versus most of the last 6 months.

We’ll be back tomorrow to recap the week and remember to look out for March’s second “Question of the Day” early next week!

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. 

Connect with Craig at activetrader@cmegroup.com

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