Key Takeaways with Craig
CME Group markets were a bit quieter today as US Equity prices rallied and Treasury yields continued higher. WTI Crude Oil futures prices were down slightly and CME Grains futures were little changed. Implied volatility in CME’s Equity Index options declined and is now trading below the 3-month average closing level, though still elevated relative to historical norms. Implied volatility in CME’s Treasury options traded higher today as the 10-Year rose from 6% to over 7%. Additionally, CME Group’s FedWatch tool continues to show the Fed Funds futures market pricing in more aggressive rate hike decisions from the Fed.
In addition to the jump in Treasury options volatility, we also saw the skew move towards the Puts again, as you can see in the blue line in the 25 delta risk reversal QuikStrike graph below. Keep in mind, these are options based on traditional Treasuries that are quoted in price, not yield. So the increase in Put volatility serves as protection against further downside price moves (and upside moves in yield).
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