Key Takeaways with Craig

US Equity Index prices rose today, as did Gold futures prices which were up by nearly 1.5%.  Implied volatility in the Gold options markets continued to rise and the Calls were bid relative to the Puts today according to the 25 Delta Risk Reversal.  WTI Crude Oil futures prices fell by about 3.25% today. 

US Treasury yields were little changed as was the difference between the Micro 2-Year and 10-Year futures yield, which we’ve been watching lately.  That spread remains at about 16 basis points. 

Finally, Cryptocurrencies, including Bitcoin and Ether futures prices rose today.  The price of Bitcoin futures was up by over 4% and Ether futures rose by nearly 5%.  Remember that CME will launch options on its Micro Bitcoin and Ether futures this Sunday night for trade date Monday.  At current prices the notional value of these Micro futures contracts is as follows:

Micro Bitcoin:  $4,408.50 (current futures price 44,085)

Micro Ether:  $311.40 (current futures price 3,114.0)

The current 30-day implied volatility in CME’s standard Bitcoin options is currently trading at a relatively low (versus the levels we’ve seen since we launched the options) 63.4%.  Using that volatility and the options calculator available on CME Group’s website with the “Black 76” model, the theoretical value of a near the money straddle on a Micro Bitcoin with 30 days until expiration would be approximately as follows:

  • Call = 3,215 | Put = 3,207 | 6,422 Points = $642.20

Using a slightly higher implied volatility for Ether, we get a theoretical value for a near the money straddle in options on Micro Ether as follows:

  • Call = 241 | Put = 227 | 468 Points = $46.80

Even though these are just theoretical values, at $642.20 and $46.80, they do provide an estimate of the manageable size of these options that will launch next week. 

In the graph below, powered by QuikStrike data, we graphed the last 12 months of 30-day implied volatility in some of CME’s major products.  The red line represents Bitcoin implied volatility and, as you can see, even though the current level is near the lowest we’ve seen in the last year, it is still amongst the highest relative to the other products.  Only WTI Crude Oil, which is trading at historically high implied volatility levels in part due to the geopolitical situation in Ukraine, is trading at a higher implied volatility.  

Today's Future Price Action

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