Key Takeaways with Craig
US Equity indexes traded mixed again today with the Dow Jones Industrials slightly lower and the other major indexes logging modest gains. US Treasury yields were slightly higher with the Micro 2-Year and 10-Year Treasury yields up by between 2 and 3 basis points. Despite the muted price action, implied volatility/CVOL levels were higher in CME’s Equity Index and Treasury options as the market continues to watch the goings on in the debate over the US debt ceiling.
In compiling last week’s review of price and volatility change, we noticed a rather large increase in volatility in some of CME’s grains markets so we took a closer look at the Corn options markets. Using historical CVOL data, we found that the graph provides a nice illustration of the cyclical nature of some of the grains markets at CME Group. In the graph below, we used CVOL data for Corn options back to 2013. Each orange line in the graph below represents the CVOL level in that particular year on or around May 22nd. As you can see, in every year since 2014, volatility in Corn options has continued to increase from the third week in May and hit a peak between the end of May and middle of July, depending on the year. The smallest increase in the CVOL level from around May 22nd to the peak occurred in 2019 at 29%, while the largest was 75% in 2015. The yearly details are contained in the chart below the graph. It’s worth noting that there was a peak in March, 2022 though that was attributable to the impact of the invasion of Ukraine by Russia.
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