Key Takeaways with Craig

US Equity Indexes were mixed today with the Nasdaq trading higher, the Russell 2000 trading slightly lower and the S&P 500 and Dow Jones Industrials both near steady on the day.  Implied volatility in the options that expire 30 days from now was little changed, though vol in the options that expire tomorrow and Friday afternoon, after the release of GDP (tomorrow) and PCE (Friday) traded higher and remains elevated versus the options that expire next week. 

It was an otherwise relatively quiet day heading into the release of those two reports along with continuing corporate earnings announcements.  Gold and Silver futures prices, which we’ve written about extensively here in the Key Takeaways column over the last several weeks, were both slightly lower again.   While CVOL levels in the options markets of both metals remains elevated relative to the last 12 months, the convexity in the options has returned to more “normal”, or even, lower levels.  The CVOL graphs below show the convexity in Silver options (top) and Gold options (bottom) over the last year.  Particularly in Silver, you can clearly see that after spiking to one-year highs, it has come down dramatically.  Remember, the higher the convexity, the higher the volatility in the out of the money options is relative to the at the money options. 

Have a great evening and we’ll be back tomorrow reporting on the market action following the GDP release.  

Today's Future Price Action

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