Interest rate concerns have been in the news this month. Please see the bottom of this Blog for information about interest rate presentations In Chicago this Monday, November 16.
A Nov. 4 news story on Bloomberg stated that – “Federal Reserve Chair Janet Yellen and New York Fed President William Dudley both said the central bank could boost interest rates as soon as next month, while Fed Vice Chairman Stanley Fischer voiced confidence that inflation isn’t too far below the central bank’s goal.”
Over the past eleven trading days –
- The ProShares UltraShort 20+ Year Treasury ETF (TBT) rose about 4%, and
- The iShares Barclays 20+ Year Treasury Bond ETF (TLT) fell about 7%.
CHARTS FROM LIVEVOL PRO
What are some online tools for options investors so that they can see more information to help make them better informed about managing positions and risks? Livevol Pro is built to be the new standard in option trading front-ends. Livevol Pro is structured around proven, real-world decision-making processes of traders and market makers with long-term, profitable trading careers. The full range of data, calculations, alerts, and visualizations needed to execute successful trades is woven seamlessly into a single web-based tool with no download or install needed. You can sign up for a free 15-day trial of Livevol Pro at https://secure.livevol.com/trial/livevol-pro-trial/registration.
Below is a Livevol Pro chart that shows the estimated skew for 30-day TLT options at the close November 11. The chart shows that the estimated implied volatilities ranged from about 10.5 to more than 25, depending on the strike price and expiration. The Fed is scheduled to meet in mid-December (and note in particular the pink line representing the skew for TLT options expiring December 18).
The CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIX) uses CBOE’s well-known VIX® methodology to measure a constant 30-day expected volatility of 10-year Treasury Note futures prices, and is calculated based on transparent pricing from CBOT’s actively traded options on the T-Note futures. CBOE Futures Exchange (CFE) recently launched futures on TYVIX, ticker VXTY, which are the first exchange-traded contracts based on interest rate volatility that offer a standardized way of gaining exposure to forward implied interest rate volatility. The historical patterns of TYVIX in many cases exhibit upward spikes when 10-year Treasury note and futures prices experience large swings, especially on large downswings. Due to this dynamic, VXTY could provide a hedging mechanism for core instruments of the U.S. fixed income market such as mortgage backed securities, and corporate, municipal and government bonds. Please visit www.cboe.com/TYVIX for more information.
For more information on managing interest rate volatility, please visit these links –
- CBOE Options on Interest Rate ETPs
- CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIXSM)
- Livevol Pro registration
EVENT IN CHICAGO ON MONDAY NOVEMBER 16
After a decades-long bull market in bonds, driven by a concomitant secular decline in interest rates, investors may soon face a new challenge: navigating a rising interest rate environment. The November Chicago QWAFAFEW meeting will bring together experts in the field to discuss their unique perspectives on the fate of rates as well as different approaches towards managing interest rate risk. The meeting will be held Monday, November 16, at Morningstar, 7th floor of 22 West Washington Street in Chicago. Doors will open at 5pm. The meeting will start at 5:30 and will end by 7pm.
The two panelists are:
- Bob Johnson, CFA, Director of Economic Analysis, Morningstar
- Collin Martin, CFA, Director – Fixed Income Strategy, Schwab
Topics to be covered include:
- What happens if interest rate were to double in the next 18 months?
- What will happen to the largest fixed income mutual funds, close-end funds, and ETFs?
- What are investors doing or should be doing in anticipation?
Admission is $15 in advance (or $20 at the door) ($10 students) with light food and drinks provided.
Purchase tickets or reserve a seat (space available) via TicketLeap at