Key Takeaways with Craig

US Equity prices fell and US Treasury yields continued to rise as we head into the second half of February.  Rising volatility characterizes many CME products as the market weighs the implications of a potential Russian invasion of Ukraine and potential actions by the FOMC to try to slow inflation.  Specifically, we saw the following moves in implied volatility (“vol”) and skew:

  • E-mini S&P 500 - Feb 9th: 30-day vol = 16.3% | Today:  30-day vol = 24%
  • E-mini S&P 500 - Feb 9th: 25-delta Risk Reversal (Call vol minus Put vol) = -5.7 | 25 Delta Risk Reversal = -9.2
  • 10-Year Treasury - Feb 9th:  30-day vol = 5.3% | Today:  30-day vol = 6.4%
  • WTI Crude Oil - Feb 10th:  25-delta Risk Reversal = -4.5 | Today:  25-delta Risk Reversal = 4.8
    • Out of the money Calls are now trading at a premium to the Puts
  • Gold - One day vol move from 12.8% to 15.5%
    • Like WTI, out of the money Gold Calls are now trading at a higher vol than the Puts

We’ve included a Quikstrike graph of 3 months of 30-Day implied volatility in the Gold options market to illustrate today’s dramatic spike in vol. 

In addition to the increases in volatility, the US Treasury Yield curve continues to flatten.  Because we don’t have historical data on the new Micro Treasury Yield contracts, we used the St. Louis Fed constant maturity data ( as a proxy.  Using this, on February 10th, 2021, the difference between the 2-Year Yield and 10-Year Yield was 104 basis points; today, the difference between the 2-Year and 10-Year Micro Yield is down to 35 basis points.  Further, the difference between the 5 and 10-Year Micro Yields is only 6.5 basis points.   

Today's Future Price Action

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