Key Takeaways with Craig
Today seemed to follow the traditional “risk-off” type of trade with Equity prices falling, Treasury prices rising (yields falling) along with the price of Gold. Consistent with a traditional “risk-off” day, implied volatility rose in the options markets as well. In contrast to reports a couple of days ago that Russia was removing troops from the Ukraine border, President Biden told reporters today that a Russian invasion of Ukraine could come “within days”. Of course, the US Treasury market weighs this geo-political threat against persistent inflation in the US and potential short-term interest rake hikes.
The reaction to all of the news was perhaps most noticeable in Gold futures prices which rallied above 1,900 for the first time in 8 months. As you can see in the top QuikStrike graph below, the price of Gold futures hasn’t been this high since June of last year (orange line) and 30-Day volatility hasn’t been this high in almost a year. Further, the bottom graph depicts the 25 Delta Risk Reversal (Call volatility minus Put volatility). As you can see, the out of the money Calls have not traded this high relative to the Puts in over a year.
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