Key Takeaways with Craig
US Equity prices continued to slide and Treasury yields continued to rise to begin 2022. Earlier in the trading session, the Nasdaq and Russell 2000 indexes led the losses, down by about 1% and 1.5% respectively. Implied volatility (“vol”) in all four major indexes rose in CME options markets but most notably in the E-mini Nasdaq-100 where at the money, 30-day vol had risen from 17.3% to 24% since the close one week ago on January 3rd. However, after a late-day price rally, the Nasdaq was trading higher on the day and implied volatility had ticked down to 22%.
In the US Treasury markets, the Micro 2 and 5-Year Treasury Yield futures rose by about 3 basis points while the longer term 10 and 30-Year contracts were near steady on the day.
Looking at the upcoming week, we’ll get new inflation readings on Wednesday with the release of the CPI and on Thursday with the PPI. Once again, these reports are not lost on the options markets as we see elevated implied volatility in the Wednesday and Friday expirations relative to more deferred expirations in both the Equity and Interest Rates markets at CME.
Natural Gas futures prices were up by about 4% today, presumably on forecasts of colder weather in January (those in Chicago today would understand..). However, as you can see in the yellow line in the QuikStrike graph below, after last year’s historically high implied volatility levels, current February vol has normalized relative to February vol at this time of the year since 2015.
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