Key Takeaways with Craig

US Equity Indexes were little changed today, while Treasury Yields rose, as the market looks toward Friday’s inflation report.  Specifically, CME’s 2-Year Yield future was higher by about 5.5 basis points and the 10-Year was up by over 8 basis points.  CVOL levels in CME’s Treasury options markets was little changed. 

In addition to the PCE (inflation) report that is due out on Friday, the market will also be watching for the Planted Acreage report that will detail how much Corn and Soybeans have been planted for the upcoming season a little later Friday morning (11:00 AM Central Time).  Remember, in March, the Prospective Plantings estimates were released, which showed the expected amount and crop mix to be planted, while this will report what was actually planted. 

In the graphs below, that are powered by QuikStrike data, we’ve focused on the Corn futures and options markets.  Each graph shows the December Corn expiration (we looked at the DEC expiry because, as the “new crop”, it, potentially, can be most impacted by the planted acreage report) with Days to Expiration on the X axis.  The top graph illustrates the price of DEC Corn futures with the dotted red line and each year since 2019, with similar Days to Expiration, in the other colored lines.  As you can see, only in 2020 was the price of DEC Corn this low at this time of year.  The middle graph is similar, but shows the at-the-money implied volatility instead of price.  Again, at this time of year, options “vol” has only been this low at this time of year in 2020.  However, the bottom graph depicts the skew, using the 25-Delta Risk Reversal as a proxy.  This graph shows that the Call volatility relative to the Put volatility is near the average level that it’s been in the prior 5 years at this point on the calendar. 

Have a nice summer night and we’ll be back tomorrow!

Today's Future Price Action

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