Key Takeaways with Craig
US Equity prices and Treasury yields were lower today while volatility in the options markets ticked higher in both. The stock market decline was generally modest, though the small-cap Russell 2000 index was down by over 2% on the day. The yield curve shift was parallel through 10 years as both the Micro 2 and 10 Year Yield futures contracts were down by 9-10 basis points (bps), while the Micro 30-Year was only down by about 3 bps.
After an active day yesterday, CME Energy markets were quieter as WTI Crude Oil and Natural Gas futures prices were near steady on the day. Gold futures prices were up nearly 2% today with the June expiration trading near $2,040 per ounce. In the last five years, the only two days on which Gold futures prices have closed this high were in August, 2020 (during the COVID-19 pandemic) and in March, 2022 (after the Russian invasion of Ukraine). CME’s Gold options markets have responded to the price action as well. The graph below, which was created using CVOL data, shows the CVOL and Skew levels over the last 12 months. The blue line represents CVOL and the red line approximates the average CVOL closing level over the last 12 months. The green line represents the Skew in Gold Options, as measured by CVOL, and the yellow line approximates the average closing Skew level over the same 12 months. As you can see, both implied volatility and skew (meaning the Calls are trading relatively high relative to Puts) are considerably higher than the 12 month average.
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