Key Takeaways with Craig

Once again, due to vacation schedules, we will be using the Key Takeaways section to feature a CME product rather than for a market recap.  We haven’t covered CME Cryptocurrency products in detail here in the Key Takeaways section recently but a lot has been written lately about the decline in volatility in Bitcoin relative to even stock indexes so we thought we’d look into that. 

Using QuikStrike we graphed 2 years of historical volatility and 2 years of implied volatility in the Bitcoin, E-mini S&P 500 and E-mini Nasdaq-100 futures and options.  Historical volatility is a measure of the price changes that have occurred in the futures price over a specified amount of time while implied volatility, as regular readers of Key Takeaways  know, is a measure of the amount of future movement the options market is pricing into the futures.  In other words, Historical Volatility is a measure of what has happened while Implied Volatility is a measure of what the options market is saying will happen. 

As you can see in the top graph, while implied volatility in Bitcoin Options has declined since the beginning of 2021, it still trades at a substantially elevated level relative to the stock indexes.  However, with the recent range-bound trading activity in Bitcoin futures, the 20-Day historical volatility in Bitcoin futures has indeed fallen below that of E-mini Nasdaq-100 and only very slightly above E-mini S&P 500.  This is quite a deviation from the 2-Year average:

2 Year Historical Volatility Average – E-mini S&P 500: 17.3

2 Year Historical Volatility Average – E-mini Nasdaq-100:  23.6

2 Year Historical Volatility Average –  Bitcoin:  69.98

So, the numbers suggest that while the price fluctuations of Bitcoin have subsided over the last month or so, the Bitcoin options market continues to price in the possibility for greater volatility going forward.  

Lastly, with the U.S. midterms next week, we took a look at volatility in the 10-Year Treasury options immediately before and after the last few major elections. Watch our takeaways here

Today's Future Price Action

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