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The Search for Volatility

With 50.5 trading days left in the year and equity vol DOA, market participants are hunting for something to trade. Here’s a rundown of volatility levels by asset class (equities, metals, fx, energy, ags, and rates); all vol cones are for a 5-year history with expirations on the left-hand side.

Equities

E-Mini S&P 500 vol is at 5-year lows:

Metals

Gold and silver vol is near 5-year lows as well:


Copper vol shows signs of life for shorter dated expiries after testing recent highs:

FX

FX vol is middling:



Energy

Oil vol is low as WTI grinds higher:

Natural gas shows signs of seasonality:

Ags

Ags also harboring low vol:






Rates





Eurodollars

Eurodollar vol reflects uncertainty around the next rate hike:





Cross Asset Class Volatility Update

In the last few weeks volatility has returned to financial headlines with a vengeance leaving traders checking under their beds for asset bubbles and causing “panic” when VIX traded with a 17-handle for the first time since November 2016. So what’s really playing out in markets?

* note that the volatilities shown are calculated using industry standards based on the type of asset; for example, absolute levels cannot be compared between rates and metals.

Rates

In rates space historical volatility (orange) has picked up but implieds (blue) are lackadaisical. FV/5-yr, TY/10-yr, and US/bond, 30-day constant maturity series are shown respectively below:

 

Here’s a longer dated TY history:

Metals

Gold vol has actually found a bid (with silver and palladium following suit):

While platinum, thus far, is flat:

Energy

Natural Gas implied volatility is the lowest it’s been since 2014:

Although oil is off the lows of the year:

Ags

Vol has come back down in grains after an exciting month although wheat could be picking up again:

Equities

And last but not least, E-mini S&P500 vol has caught a bid:

For a little perspective of where we are currently, here’s a 5-year history of a few constant maturity series:

Like all things, low vol environments eventually come to an end, but low vol by itself doesn’t “trigger”  eruptions. Claiming that vol can uptick ahead of an event isn’t exactly going out on a limb. But I’m sure they’ll tell you they told you so next week.

New Equity Index Contracts on QuikStrike

The FTSE Russell 2000® has returned to the CME giving futures and options traders seamless access to mid-cap equities and margin offset benefits. Weekly volume has nearly tripled since the contracts were first listed on July 10th, and all positions will need to be transferred from the ICE to the CME once September expires (details are available on the CME website).

As part of the same agreement the CME has also listed contracts on the Russell 1000 (including the Growth and Value indexes), FTSE Emerging Markets, FTSE Developed Europe, and FTSE China 50.

Contract Specifications

Newly listed contracts include:

  • E-mini Russell 2000 Index
    • Futures (symbol: RTY)
    • Options
      • quarterlies (symbol: RTO)
      • weeklies (symbol: R1E, R2E, etc.)
      • EOM (symbol: RTM)
  • E-mini Russell 2000 Growth Index futures (symbol: R2G)
  • E-mini Russell 2000 Value Index futures (symbol: R2V)

The futures expirations will coincide with standard US equity index futures on the
third Fridays of March, June, September, and December.

Open Interest in Options on the Rise

If you’re looking for the best liquidity in options, open interest is picking up in the Sep quarterly and August weekly expirations as shown in the Open Interest & Settlements (under Market Reports in the Professional editions):