Image 2: Snapshot of the economic data releases

Image 2: Snapshot of the economic data releases
Source: QuikStrike

When I see such a wide spread of implied volatility, the first stop I usually make is to the Dashboard within QuikStrike. From here, I can look at the economic releases for the given period to determine what the market is trying to price in and whether I agree with that differential in pricing. Once on this page, I can choose the filter at the top to see what I want to see. In this example, I have chosen the entire month of December (not shown here because it would be too large). As I scan the month of December, there are several well-known events that traders are most likely bracing for: nonfarm payrolls data on Friday, December 8, and the FOMC meeting on Wednesday, December 13. However, there are several other catalysts that the market may not be as focused on that may be of consideration as well: Empire Manufacturing, which is thought to lead the economy, on December 15; housing market data from NAHB, MBA and building permits December 18-20; and Treasury auctions every Monday and Thursday throughout the month. Sometimes, it is these other events that the market is not initially focusing on that could prove to be the bigger movers of a market. For example, if the debate is about hard vs. soft vs. no landing, that housing market data and Empire Manufacturing may prove to be the most important news of the month. If the market is worried about the U.S. government’s ability to successfully fund, each Treasury auction is a potential catalyst.

Image 3: CME FedWatch Tool probabilities for December FOMC meeting

Image 3: CME FedWatch Tool probabilities for December FOMC meeting
Source: CME FedWatch Tool

Image 4: Forward volatility calculation

Image 5: Commitment of Traders for 10-Year futures

Image 6: Futures chart for generic 10-Year futures

Image 7: CVOL tools for the Treasury complex with a time series for the 10-Year options CVOL

Image 8: Volatility surface for TY options

Image 9: Expected return for TY2Z3 110 calls vs. TYF4 110 calls calendar spread

Image 10: Risk view from QuikStrike Spread Builder