Key Takeaways with Craig
US Equity Index prices were modestly higher heading into the 1:00 PM Central Time FOMC announcement then fluctuated after the Fed announced another 25 basis point hike to its Fed Funds target rate. In late afternoon trading, stock prices sold off and ended broadly lower, with the Dow Jones Industrials losing about .75%. The Micro 2-Year Treasury yield, which was lower by about 5 basis points before the announcement, continued to sell off after Chairman Powell’s remarks to finish down by nearly 12 bps. It is worth noting that CME’s FedWatch tool now reflects a 12% probability for another 25 basis point hike at the June meeting; up from near 0% yesterday. In CME’s options markets, Equity Index options volatility was trading higher at the end of the day, while CVOL declined in the Treasury options.
WTI Crude Oil futures prices sold off again today, down another nearly 5%. With today’s move, prices are down 11% since last Friday, while CVOL has spiked 18% higher (37->45.2). Even though the skew shifted slightly toward the Puts today, it is actually higher (toward the Calls) since Friday’s close. The solid blue line in the CVOL graph below depicts the CVOL level, the dotted line represents the futures price and the purple line shows the skew.
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