Key Takeaways with Craig

US Equity prices sold off sharply in afternoon trading action despite a 15 basis point decline in the Micro 2-Year Treasury yield and an increase in the probability that the Fed raises rates by 25 basis points at its March 22nd from 21% to nearly 40%.  The sell-off comes ahead of tomorrow’s February Employment Situation report which will provide the latest reading on the health of the US labor market. Implied volatility in CME’s Equity Index and Treasury options markets rose with today’s price moves with the aggregate Treasury CVOL reaching the highest reading since the beginning of December, 2022. 

In other CME markets, WTI Crude Oil futures prices continued to come down, trading at about $75.50 per barrel, after topping $80 earlier in the week.   Nat Gas futures prices were down by about 2%, Gold rose by about 1% and most major foreign currencies were higher versus the US Dollar in CME’s FX futures markets.  Finally, Bitcoin futures fell by over 7.5% to the lowest levels we’ve seen since the middle of January.  Implied volatility in the Bitcoin options only rose by a bit though and that of options with 30 days until expiry remain at under 50%. 

The market-moving potential of tomorrow’s Employment doesn’t seem to be lost on CME’s Equity Index options markets, as the options expiring tomorrow are trading at elevated vol levels compared to the expiries next week and beyond.  The blue line in the QuikStrike graph below depicts the current implied volatility curve in the E-mini Nasdaq-100 options and the orange line depicts yesterday’s volatility settlement values.  As you can see, implied volatility moved higher throughout all expirations, but significantly in the options that expire tomorrow, which are trading above a vol of 40%.  CME’s Event Volatility Calculator, which uses this term structure to estimate the futures price move that the options market is pricing in due to an economic release like the Jobs number, suggests that the option market is pricing in a ~230 point move in the E-mini Nasdaq-100 futures as a result of the Employment report release. 

Today's Future Price Action

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