Key Takeaways with Craig

Due to scheduling conflicts, we are writing the Key Takeaways section during mid-day trading rather than closer to the end of the day.  As of this writing, US Equity Index prices were mostly lower though the Nasdaq was holding on to slight gains.  Despite the break in prices, implied volatility in CME’s Equity Index options rose just slightly and remains under the 3-month average. 

Cryptocurrency prices have risen and that was reflected in CME’s Bitcoin and Ether futures prices which were trading about 7 and 8% higher than Friday’s closing prices.  On the first day of trading in CME’s Micro Bitcoin and Ether options, 30-day implied volatility in Bitcoin options remains historically low at under 60%. 

Finally, perhaps among the most noteworthy news in today’s markets, the difference between the Micro 2-Year and Micro 10-Year yield fell to below 10 basis points earlier in the day and is currently trading at about 11 basis points.  As regular readers of the Key Takeaways column know, we’ve been keeping an “unofficial eye” on this metric as the yield curve has flattened.  This widely watched benchmark can be important as inversions of these two yields has oftentimes preceded a recession in US markets. 

We’ve graphed the Risk Reversal of the 10 Year and 2 Year Treasury options at CME in the upper two graphs below using QuikStrike data.  As you can see, the Puts in both are trading higher, relative to the Calls than they have recently, but it is exaggerated in the 2-Year.  Remember, the traditional Treasury futures and options are quoted in Price not Yield, so these are Puts based on the price.  In the bottom graph, we graphed the difference between the price of the Micro 10 Year and 2 Year since we launched the products last Fall.  As you can see, the difference is approaching 0 and is nearing inversion.  

Today's Future Price Action

Traders Resources

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