Key Takeaways with Craig

US Equity prices rose modestly after today’s CPI release showed year over year inflation at the slowest level since March, 2021.  Implied volatility in CME Group’s Equity index options was little changed today and the options that expire tomorrow, after the FOMC decision on its Fed Funds target, remain elevated.  Incidentally, after today’s CPI number, CME’s FedWatch tool is assigning a 94% chance of no change to the Fed Funds target tomorrow, up from 79% yesterday.  The tool continues to suggest that the market is pricing in a rate hike at the July meeting. 

Despite the lower CPI number and increased probability of no change at tomorrow’s FOMC meeting, the Micro 2-Year Treasury Yield future was up by 8.5 basis points today and the Micro 10-Year was up by about 6.5.  The Micro 2-Year yield is still about 40 basis points lower than the highs we saw in the beginning of March but is up by about 95 basis points in the last, approximately, 5 weeks. 

The implied volatility curves in CME’s FX options versus the Equity Index options serves as a nice example of how events like an FOMC meeting can impact the implied volatility at which different options trade.  The upper QuikStrike image below shows the Euro FX option implied volatility curve and the lower image depicts the E-mini S&P 500 options curve.  As you can see, the Euro FX options expire at 10:00 AM Eastern (before the FOMC announcement anticipated at 2:00 PM), while the E-mini S&P 500 expire at 4:00 PM Eastern (after the anticipated FOMC announcement).  In the Euro FX, the options that expire tomorrow before the FOMC announcement are trading at an implied volatility far below those that expire on Thursday after the rate decision; in the E-mini S&P 500, the options expire after the announcement tomorrow afternoon and are trading well above those that expire on Thursday.  Again, we thought this was a nice illustration of the uncertainty that gets priced into the options market during events like an FOMC decision.      

Today's Future Price Action

Traders Resources

The information in the market commentaries have been obtained from sources believed to be reliable, but we do not guarantee its accuracy and expressly disclaim all liability. Neither the information nor any opinions expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts. The information on this site compiled by CME Group is for general purposes only. All information and data herein is provided as-is. Additionally, all examples on this site are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. CME Group assumes no responsibility for any errors or omissions. CME Group, its affiliates and any third party information and content providers expressly disclaim all liability with respect to the information and data contained herein including without limitation, any liability with respect to the accuracy or completeness of any data. You use the data herein solely at your own risk. All data and information provided herein is not intended for trading purposes or for trading advice. All matters pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. Current rules should be consulted in all cases concerning contract specifications.

Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Due to the leveraged nature of futures trading and swaps trading, it is possible to lose more than the amount deposited in a position. Therefore, traders should not deposit more funds than they can afford to lose without negatively affecting their lifestyles. A trader cannot expect to profit on each trade, and should only devote a small amount of their available funds to each trade. All references to options refer to options on futures.

Past performance is not necessarily indicative of future performance.

CME Group, the Globe Logo, Chicago Mercantile Exchange, Globex and CME are trademarks of Chicago Mercantile Exchange Inc. CBOT is the trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is the trademark of the New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other marks are the property of their respective owners. Each of Chicago Mercantile Exchange Inc. (ARBN 103 432 391), The Board of Trade of the City of Chicago Inc (ARBN 110 594 459), the New York Mercantile Exchange Inc (ARBN 113 929 436) and Commodity Exchange, Inc. (ARBN 622 016 193) is a registered foreign company in Australia and holds an Australian market licence.

This site does not constitute a prospectus, product disclosure statement or legal advice, nor is it a recommendation to buy, sell or retain any specific investment or to utilise or refrain from utilising any particular service. Readers should consult their legal advisors for legal advice in connection with the matters covered on this site.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2024 CME Group Inc. All rights reserved.