Key Takeaways with Craig

Once again, US Equity prices struggled to find a clear direction today as the markets kept an eye on US/China/Taiwan tensions during the Speaker of the House, Nancy Pelosi, visit to Taiwan.  After a sell-off later in the trading session, stock prices ended lower and near the lowest levels of the day.  Implied volatility in CME’s Equity Index options markets rose with the price break. 

In other markets, US Treasury yields jumped today.  According to CME’s Micro Treasury Yield futures, yields increased as follows:

  • 2-Year:      +16.8 basis points
  • 5-Year:      +18.8 basis points
  • 10-Year:    +13.6 basis points
  • 30-Year:    +10.7 basis points

And with this move, the 2-Year is now yielding about 32.5 basis points more than the 10-Year. 

Finally, WTI Crude Oil futures prices fluctuated throughout the day as well but wound up little changed.  This price action comes before tomorrow’s expected announcement at the end of the OPEC meeting on its plans for oil production.  CME’s OPEC Watch tool, which seeks to predict the probability of certain OPEC action based on the price of options on WTI Crude Oil, suggests that the most likely outcome of the OPEC meeting is for it to “maintain its output increase” (87.7%).  Additionally, CME’s Event Volatility Calculator suggests that the options market is pricing in an approximately $3.55/per barrel move in either direction in the price of WTI Crude Oil futures as a result of the OPEC decision.  This is based on the term structure of volatility in WTI Crude Oil options which we’ve illustrated with the QuikStrike graph below.  As you can see, the volatility in the options that expire this Friday is trading substantially higher than the more deferred expiries.  

Today's Future Price Action

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