At-a-Glance
Key Takeaways with Craig
US Equity prices continued to climb today, ahead of tomorrow’s release of the CPI number, with the major indexes up by between .25% and .8%. Despite the price rally, implied volatility in CME’s Equity Index options ticked slightly higher, but more significantly in the options that expire tomorrow afternoon. CME’s Event Volatility Calculator, which uses the term structure of volatility in options markets to estimate the futures price move attributable to events like a CPI release, suggests the options market is pricing in an 80 point move in the E-mini Nasdaq-100 due to the inflation number report. US Treasury yields were nearly unchanged today, though CVOL levels in CME’s 10-Year Treasury Note options is trading above the levels we saw through most of June.
WTI Crude Oil futures prices were up another 2.6% today and are now up 10% since the last week of June. While CVOL levels have actually come down during the price rally, the volatility in Calls has risen versus that of the Puts. While the skew in the options market is still to the Puts, you can see from the purple line in the graph below that it is almost as close to neutral as it has been in three months.
As we said yesterday, tomorrow brings us both the CPI and WASDE reports and we’ll be back tomorrow afternoon to report on the resultant market action.
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