At-a-Glance
Key Takeaways with Craig
US Equity prices bounced back after yesterday’s sell-off with the Russell 2000 up by about 2.5% after losing about 4% yesterday. As we’ve written about recently, the small-cap Russell 2000 has generally underperformed the other major US indexes this year, as the futures price is down about 2% on the year. Lately, the Russell 2000 has also been particularly volatile, as you can see in the top graph below that represents Historical Volatility in the E-mini Nasdaq-100 (blue line) and E-mini Russell 2000 (orange line). Remember, historical vol is a measure of the price movement that has happened (in this case 20 days), whereas implied volatility, which we write about a lot, is a measure of the options market’s anticipated future price moves. This graph clearly illustrates the elevated magnitude of price moves in the Russell 2000 lately.
US Treasury yields gave back some of yesterday’s gains, as CME’s 2-Year Treasury Yield futures contract was down by about 7 basis points and the 10-Year was lower by about 5. In CME’s options markets, the 2-Year CVOL was up by 11.3 points while the 10-Year was down by about 3. The lower CVOL graph on the left depicts this divergence. Convexity in the options markets of both the 2s and the 10s is at recent highs as well.
Gold futures prices were down slightly today, but are now down by about 3% since the beginning of February. The CVOL graph on the right side below depicts the price of Gold futures (dotted line), the skew (purple line) and CVOL (solid blue line). As you can see, as the price has declined, implied volatility has also come down and the Puts have decreased relative to the Calls.
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