At-a-Glance
Key Takeaways with Craig
What a difference a couple weeks makes! After spending much of March talking about how low volatility was in many CME markets, the first couple weeks of April have been quite the opposite. Factors such as geo-political tensions, hotter than expected inflation reports and a corresponding dampening of expectations of cuts to the Fed Funds target rate have combined to generate outsized price moves in several CME markets.
- We’ve written extensively about the Gold and Silver markets lately, so we’ll start there. Gold futures prices traded in an extraordinarily large range today, first rallying, but finishing lower on the day. This led to a daily range of $95 per ounce and CVOL in the options, since March 27th, is up 60%. CVOL in silver options, the futures for which traded as low as 28.24 and as high as 29.995 today, is up 58% since March 27th.
- Perhaps driven by some of the same factors, CVOL in the G5 FX markets, after trading at historically low levels for much of March is up 26% since March 27th.
- As we stated, after higher-than-expected inflation reports this week, CVOL in the aggregate Treasury market is up 38% since March 27th. Perhaps a more dramatic indication of the move in Treasury options is the convexity, which is as high as it’s been since the beginning of the COVID-19 pandemic in March, 2020. Treasury convexity over the last 3 years is graphed below. Remember, convexity measures the implied volatility of the out of the money options versus that of the at the money options, so this increased level indicates traders are paying more for the options on the “wings” than they had been.
- Geopolitical tensions continue to impact CME’s WTI Crude Oil markets as well; CVOL is up 32% in those options since March 27th.
- Finally, all of this of course has not been lost on CME’s Equity Index markets which sold off again today. Implied volatility in the E-mini S&P 500 options is 44% higher than it was on March 27th.
We’ve included the week in review chart that we normally look at on Friday’s below as well. As always, we wish all of our In FOCUS readers a safe and happy weekend and we’ll see you on Monday.
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