Key Takeaways with Craig

US Equity prices were mixed again today, although the Nasdaq and Russell 2000 outperfomred the Dow Jones Industrials today.  Implied volatility was little changed on the day.  Short-term US Treasury rates rose with the 2-Year Micro Yield futures up by about 5.5 basis points while the long-end yields were near steady on the day.  CME’s FedWatch tool continues to show a near 70% chance of a 25 basis point hike to the Fed Funds target rate at the March FOMC meeting. 

CME commodity markets were active again as WTI Crude Oil futures prices approached $80/barrel and Gold futures prices were down by over 2%.  Implied volatility in the Gold options remains relatively low compared to the last several months, but we did see the Puts bid over the Calls today, at least according to the 25 Delta Risk Reversal. 

The Department of Labor is scheduled to release its December Employment report tomorrow morning.  CME’s Event Volatility Calculator suggests that the E-mini Nasdaq-100 options market is pricing in a greater than 180 point move in the E-mini Nasdaq-100 futures price attributable to the jobs number release.  This tool uses the term structure of volatility to try estimate the impact to the futures price that the options market is assigning to an economic event or number release.  We’ve included an excerpt from the Event Volatility Calculator below, along with a graph (as we did yesterday) of the volatility curve in the E-mini Nasdaq-100 options that nicely illustrates the elevated implied volatility in the options that expire tomorrow versus the more deferred expirations. 

Today's Future Price Action

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