At-a-Glance
Key Takeaways with Craig
US Equity prices struggled to find a solid direction for most of the trading day after the CPI release indicated the highest rate of inflation we’ve seen in 40 years but also in line with consensus expectations. The major indexes were trading slightly higher at the time of this writing while implied volatility in the index options at CME was nearly unchanged from yesterday. US Treasury yields were little changed on the day as well.
Currency markets at CME Group were active as the futures price of several major currencies reached multi-month highs against the US Dollar. The Euro, Australian Dollar, Canadian Dollar and Pound futures prices all hit levels not seen since mid-November of last year.
Finally, Natural Gas, which we wrote about extensively in 2021 due to the historic price and implied volatility levels at which it traded, was up by over 13.5% today, reportedly on a forecast for colder weather and supply concerns. As you can see in the upper QuikStrike graph below, after somewhat normalizing at the end of last year, the futures price is up by over 20% in the first couple weeks of 2022 and 30-Day implied volatility in the options markets is trading back up over 70%. The lower graph is a depiction of Nat Gas options skew in the form of the 25 Delta Risk Reversal. As you can see, in the last week, the Calls have increased from trading about 5% over the Puts to the current levels of about 13.5% over the Puts as traders are willing to pay relatively more for upside price exposure.
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