Vol Updates & More
Powered By: QuikStrike & QuikVol. In this post we examine Crude Oil call skew, take a peek at metals vol & more!
The first thing I would like to draw your attention to is the fact that 25 Delta (25D) call skew for crude oil futures (CL) is currently blowing out. (Figure 1) Before we go any further I should explain what I mean when I say “25D Call Skew”. In this case it is saying that compared to at-the-money (ATM) vol, the 25D vol is quite rich compared to ATM vol. As you can see in Figure 1 the 25D call skew for CL hasn’t reached this level since the US bombed Iranian nuclear sites. With the US sending a carrier strike group to the waters of the Middle East it makes sense that out-of-the-money (OTM) call vol is more expensive compared to ATM calls.
As you can see in Figure 2 this recent military build up in the Middle East by the USA has expanded vol across all energy products. To briefly explain Figure 2, this is QuikDNA a tool from QuikVol. QuikDNA is extremely useful for understanding the vol market with just a glance. The X-Axis is a Z-Score and the Y-Axis is the ticker symbols. (LO=CL, BZO=BZ, LN=NG, OH=HO, OB=RB)
I’m sure everyone and their grandparents have been talking about metals. So I won’t beat a dead horse and instead I will leave you with the current ATM vol for metals. So if you’re trading metals be sure to be ready because vol is still here and evaluated. (Figure 4)
Next I want to examine the recent uptick in equity vol. We will focus on ES, as you can see in Figure 5 vol has risen across the curve but this is most noticeable on OTM puts (25D in this case). This isn’t surprising if you look at the recent price action on ES.
Finally lets take a look at BTC. If you have not been living under a rock I’m sure you’ve noticed that BTC has had a rough couple of days. This tells us that OTM tail protection is getting bid up in vol terms and likely price terms as well. (Figure 6) The current reading is at 14.28, the 25D Put Skew has only breached the 15 level four times. (Figure 6) The first time this happened was in April of 2020 (this reading is not on this graph to make it easier to read). The next 30 trading days saw BTC rise 30% but do remember this was during 2020 markets are very different. The second breach of 15 happened in May 2022 and the following 29 trading days BTC returned 0.21%. The third time was June 2022 with BTC losing -4.45% the following 29 trading days. The last breach of the 15 level was in November 2022 with BTC returning 12.33% the next 30 days of trading.
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