Key Takeaways with Craig
US Equity prices and Treasury yields both traded lower today, though the stock price action was a bit more muted today as the net change in all four major indexes was less than 1%. Implied volatility in CME’s Equity Index options markets was slightly higher. The CVOL index for aggregate Treasuries, which takes into account the 2,5, 10 and 30-Year tenors, rose from about 163 to 174 while the skew in yield continued to move materially toward the Puts. Perhaps related to the falling yields, most major currencies were higher relative to the US Dollar and precious metals futures prices rallied as well.
WTI Crude Oil futures prices slide another 2.5% and, at about $72.30 per barrel in the January expiration, are trading at the lowest prices in almost a year. Natural Gas futures prices continued to be volatile, trading about 6% higher today.
Next week brings us the November CPI report on Tuesday (12/13) and the FOMC announcement on Wednesday, both of which have market-moving potential. This is reflected in CME’s Equity Index options volatility curves as you can see below. The blue line represents the current implied volatility by option expiration in the E-mini S&P 500 options. As you can see, the expirations around both of these economic events are trading at elevated volatility levels, reflecting the option market expectation of price volatility.
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