Key Takeaways with Craig

US Financial and Commodity markets were certainly back from the Independence Day holiday as we saw significant price action in several major CME Group asset classes: 

  • US Equity prices began the day broadly lower, but somewhat recovered throughout the day to close mixed.  Nasdaq-100 futures prices were up by over 1.5%, S&P 500 was near steady and the Dow was down by less than .5%.  Implied volatility in  the options was near unchanged on the day after trading higher earlier in the session.
  • The Equity price rally during the day occurred even as the US Treasury 2-Year and 10-Year yields inverted again.  Using CME’s Micro Treasury Yield futures as a proxy, the 2-Year was yielding about 4 basis points more than the 10-Year in mid-afternoon trading.  As we’ve discussed here in the Key Takeaways section, this is a much-watched relationship as historically, inversions have often preceded recessions in the US. 
  • WTI Crude Oil futures were trading about 8% lower in mid-afternoon action after a rally off the day’s lowest levels.  The August expiration was trading below $100 per barrel at the time of this writing. 
  • CME Grains futures prices traded lower today with Corn and Wheat both down by nearly 5% and Soybeans down by nearly 5.5%.
  • CME Group metals futures prices were lower on the day, led by Copper prices which were down another 4.5%.  We haven’t spent a lot of time on Copper prices but with today’s move it is down about 24% since the beginning of June.  We’ll cover this in more detail in tomorrow’s Key Takeaways section. 

Today, we’ll spend a bit more time on CME’s Foreign Exchange futures markets and, in particular, the Euro FX markets.  The Euro FX was down another 1.6% versus the US Dollar today and is trading at levels we haven’t seen in almost 20 twenty years.  At the time of this writing,  the Euro is trading at about 1.0315, which means it costs 1.0315 US Dollars to buy one Euro.  The last time that the Euro was trading this close to parity with the US Dollar (which means they had a 1:1 price relationship) was in late 2002. 

This price move hasn’t been lost on the Euro FX options markets.  The top QuikStrike graph below shows 30-day implied volatility (blue line) and price over the last year.  As you can see, after trading at an implied volatility below 6% from about July through mid-November of 2021 and below 7% until late February of this year, it is currently trading near 1-year highs at over 11%.  The lower QuikStrike graph depicts the risk reversal (25 Delta Call IV minus Put IV) over the same year.  As you can see in this graph, Puts are trading about 2% higher than Calls as Put sellers seek more premium (and Put buyers are willing to pay more premium) for further potential downside price moves. 

Remember, CME Group lists a variety of Foreign Exchange products so that users can customize the notional exposure they desire including, Micro, Mini and Standard Size futures as well as options contracts.  

Today's Future Price Action

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