Key Takeaways with Craig

US Equity prices were little changed and the major indexes were mixed as we roll into the first full week of July trading.  Despite the relatively subdued price action, volatility in CME’s Equity Index options ticked higher as the market looks toward a week that will kick off earnings season as well as provide the latest look at inflation numbers with the CPI (Wednesday) and PPI (Thursday).  US Treasury Yields traded lower with both the Micro 2-year and 10-Year Treasury Yield futures down by about 5 basis points.  After touching 5% last Thursday, the Micro 2-Year is trading around 4.8 today. 

In addition to the earnings and inflation reports we mentioned above, the grains markets will be looking toward Wednesday’s release of the World Agricultural Supply and Demand Estimate (WASDE) report.  This will be a widely-watched report as we move through the crucial summer months for grains such as Corn and Soybeans. 

The market-moving potential of these events doesn’t seem to be lost on the options markets.  As you can see in the two images below, volatility in the options that expire after the aforementioned reports are trading at implied volatilities much higher than the more deferred expiries.  Also, as illustrated in the top graph, the implied volatility in the E-mini S&P 500 options that expire this week is considerably higher than last Friday’s settlement levels while the more deferred options are marginally higher.  

Today's Future Price Action

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