Key Takeaways with Craig

US Equity Indexes were mixed on the first day of August trading with the Dow notching small gains and the Nasdaq, S&P 500 and Russell 200 declining slightly.  Implied volatility in CME’s Equity Index options ticked up a bit but remains low relative to the last six months. 

US Treasury yields were a bit more active with the Micro 2-Year yield rising by about 5 basis points and the Micro 10-Year up by about 7.5 bps, slightly narrowing the inversion between the two.  Perhaps correlated with the increase in Treasury yields, the US Dollar gained against most major currencies in CME’s FX markets and Gold declined by almost 1.5%.  In fact, CME metals were down across the board with Silver declining by over 2%, Copper down by almost 2.5% and Aluminum down about 1.5%. 

However, in the options markets, CVOL in both Treasury and FX options was broadly higher, but in the Metals options, CVOL continued to trade lower.  The top CVOL graph below shows five years of CVOL data in Gold options.  As you can see, the current CVOL level is the lowest it’s been since right before the COVID-19- induced volatility in early 2020.  Copper option activity has been somewhat interesting lately as well.  The lower CVOL graph depicts six months of Copper option convexity, which is a measure of the implied volatility of the out of the money options relative to that of the at the money.  As you can see, last week, we saw a spike in convexity, which means that the out of the money or, “the wings”, were bid up relative to the at the money.  Interestingly, it has continued to come down from that spike, even with today’s relatively large price move, at least compared to the price action we’ve seen lately. 

Finally, please find more information on Gold in the OpenMarkets article CME has posted here.

Today's Future Price Action

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