TWIFO 180: Metals Mysteries and Yield Curve Conundrums

  • HOST: MARK LONGO, THE OPTIONS INSIDER MEDIA GROUP
  • CME HOTSEAT GUEST: ERIK NORLAND – EXECUTIVE DIRECTOR AND SENIOR ECONOMIST

WHAT WERE THE MOVERS AND SHAKERS IN FUTURES OPTIONS THIS WEEK?

RECENT CME RESEARCH

METALS

  • QUESTION FROM MELTIM: Do you buy that metals only selloff when the calls are bid?
  • QUESTION FROM ELION: Any follow up data on the cme metal skew study? I find that one somewhat perplexing.

Gold and Silver Options Pointing to a Pullback https://www.cmegroup.com/education/featured-reports/gold-and-silver-options-pointing-to-a-pullback.html

  • Silver and gold options achieved exceptionally positive skewness late this summer.
  • Exceptionally positive options skewness often precedes corrections.
  • Even as of mid-October, gold and silver options skews remain unusually positive.

Industrial Metals: Can Demand Meet Supply Challenge  https://www.cmegroup.com/education/featured-reports/industrial-metals-can-demand-meet-supply-challenge.html

  • Two decades ago, the main problem in base metals markets was insufficient supply to meet rising demand, particularly from China. As a result, prices soared. Copper prices rose 440% between 2000 and 2011. For aluminum, prices doubled between 2000 and 2008 despite a growth in supply.

RATES/YIELD CURVE

Which Yield Curve Foretells Growth Best?  https://www.cmegroup.com/education/featured-reports/which-yield-curve-foretells-growth-the-best.html

  • The private sector US yield curve remains inverted while the public sector curve flipped positive.
  • Private sector yield curves have been better indicators of growth in the past 20 years.
  • Yield curves misfired in the mid-1990s, predicting a slowdown that didn’t happen.
  • Soaring equities could enable the economy to defy the yield curves’ suggestion of slower growth ahead.
  • A larger budget deficit, however, could make it harder for the US government to fight off any slowdown. 

What Global Yield Curves Signal About 2020 Growth – https://www.cmegroup.com/education/featured-reports/global-growth-outlook-for-2020.html

  • Yield curves are pointing to stronger growth in China, India, Chile and Brazil.
  • Yield curves are pointing towards sharp slowdowns in the US, eurozone, Japan and Israel.
  • All 23 yield curves examined have a positive correlation with growth 3-5 quarters in the future.
  • There is a wide variance in the forecasting accuracy among the yield curves.

FUTURES OPTIONS FEEDBACK

  • QUESTION FROM DM75: What are you expecting when bitcoin options launch on cme next year? Happy Holidays to the OIR crew. You guys are the best. 

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