Key Takeaways with Craig
US Equity Indexes sold off today and closed near the day’s lowest levels as the market looks to tomorrow’s CPI release as the latest indication inflation in the US. US Treasury yields, which also could be impacted by a surprise CPI number, were little changed on the day. The 5, 10 and 30-Year Micro Treasury Yield contracts were near steady though the Micro 2-Year Yield rose by 6 basis points.
Yesterday in this column we included QuikStrike graphs of the term structure of volatility in the 10-Year Treasury and E-mini S&P 500 to illustrate the elevated implied volatility in the options that expire tomorrow after the CPI number release versus the more deferred options expiries. Today, we’ve included an excerpt from CME’s Event Volatility Calculator, which uses the volatility curve (term structure) to estimate the futures price move that the options market is pricing in to the number release. As you can see in the image below, this tool suggests that the options market is pricing in a nearly 250 point move in the E-mini Nasdaq-100 attributable to the CPI release. Incidentally (but not pictured), the options market is pricing in about a 1 point move in the price of the 30-Year Treasury future.
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