Key Takeaways with Craig
US Equity Index prices spent the day in positive territory and then got another bump after the FOMC announced its decision to hold it Fed Funds target rate steady at 1:00 PM Central time. All four major US Equity Indexes were higher on the day, with the Nasdaq gaining almost 2% and the S&P 500 up by over 1%. Perhaps unsurprisingly, given the rally in stock prices, implied volatility in CME’s Equity Index options fell today. However, as you can see in the QuikStrike graph below, which depicts implied volatility in E-mini Nasdaq-100 options expiring from tomorrow through November, 24th, the options that expire on Friday, after the October Employment Situation report continue to trade at a premium. In fact, CME’s Event Volatility Calculator suggests that the options market is assigning a potential 110 point move in E-mini Nasdaq-100 futures based on the release of the Jobs number.
US Treasury yields fell after the FOMC decision was announced as the Micro 2 and 10-Year Yield futures were both down by about 10.5 basis points. Somewhat interestingly, CVOL in the 2-Year Treasury options rallied today while it fell in the longer dated maturities. The Put skew also remains more pronounced in the 2-Year than the longer dated maturities. In addition to the moves in the Treasuries, CME’s FedWatch tool is reflecting an 80% chance of no change to the Fed Funds target rate in December, up from about 69% yesterday, while the chance of a hike in December fell by about 9%.
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