Key Takeaways with Craig

Despite a higher-than-expected headline inflation number, US Treasury Yields fell today, with the Micro 2-Year Treasury Yield future falling by about 10 basis points and the 10 and the 10-Year falling by about 5.  This brings the inversion between the two to about 20 basis points; down from nearly 50 bps at the end of December.  The skew (in yield terms) in the 2-Year is trading decidedly more toward the Puts than it is in the 10-Year as well, according to CME CVOL data.  US Equity prices were mostly lower, though the Nasdaq did manage a small gain.  Implied volatility in CME’s Equity Index options fell slightly and continues to trade near 2+ year lows. 

CME Energy markets remain active as Natural Gas prices, which we’ve discussed at length in this column this week, were up by about 2% and CVOL traded higher in the options market.  WTI Crude Oil rose by about 1.75% in the midst of escalating tensions in the Middle East, though neither CVOL nor Skew in the WTI Crude Options market reacted dramatically. 

Perhaps unsurprisingly, CME Cryptocurrency futures were active today after news broke yesterday that the SEC had approved spot bitcoin ETF trading in the US.  Bitcoin futures for January expiration hit a high of 49,435 earlier in the day, before trading down to around 46,500 in late afternoon action.  Ether futures, the price action of which has outperformed Bitcoin recently, rose to 2,714 and were trading around 2,630 in late afternoon activity.  Somewhat interestingly, skew in CME’s Bitcoin options, using the 25 Delta Risk Reversal as a proxy, has shifted from a Call skew to a Put skew in the last couple of days, as you can see in the QuikStrike graph below.  This graph depicts the implied volatility of the 25 Delta Calls minus that of the 25 Delta Puts with 30 days until expiration.  The yellow line we drew on the graph is near the 0 level, so below that line represents the Puts trading slightly higher than the Calls.  Remember, CME lists an an entire suite of Cryptocurrency futures and options including standard size Bitcoin and Ether futures, Micro Bitcoin and Ether futures, options on all of those futures and an Ether/Bitcoin future that allows traders to take a position on the price of Ether relative to that of Bitcoin.  

Today's Future Price Action

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