Key Takeaways with Craig

US Equity prices struggled to find a strong direction for most of the day, but a later afternoon rally led to a positive close in the major indexes.  Implied volatility in options that expire 30 days from now declined in the E-mini S&P 500 and Nasdaq-100 options but, interestingly, the skew moved in two different directions.  In the E-mini S&P 500, the 25 Delta Calls increased in value relative to the Puts but in the E-mini Nasdaq-100 the Puts have gained substantially versus the Calls.  Last Thursday, the 25 Delta E-mini Nasdaq-100 Puts were trading at an implied just 2% over the Calls; today, that difference has grown to about 6.5%.  Since the price break on Monday, the market seems to be looking toward Federal Reserve Chairman Jerome Powell’s comments scheduled for Friday at the Jackson Hole Economic Summit.  In fact, CME’s Event Volatility Calculator suggests the options market is pricing in a potential 167 point move in the E-mini Nasdaq-100 futures attributable to his remarks.  The QuikStrike graph below of the term structure of volatility in that product illustrates the elevated levels at which Friday’s expiration is trading nicely. 

The bond market will also be watching Powell’s remarks for signs of hawkish or dovish Federal Reserve policy.  US Treasury yields increased today with the very short end (2-Year) and long end (30-Year) increasing slightly more than the 5s and 10s.  According to CME’s Micro Treasury Yield futures, the inversion of the 2s versus 10s sits at about 28 basis points.  

Today's Future Price Action

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