earnings season is starting to wind down and the tariff war may be subsiding, but economic numbers never sleep, and we get two inflation oriented reports this week. Tuesday before the market open the Consumer Price Index (CPI) is reported and on Thursday morning the Producer Price Index (PPI) will be released.
The table below is a summary of Nasdaq-100 (NDX) price action as well as option pricing on the last twelve CPI reports. The average price change on CPI day for NDX is +/-1.44%, while the average change for all days is +/-1.05%. Last month, CPI was negative, which in conjunction with tariff relate volatility, resulted in a loss of 4.19% on CPI for the NDX. We track 1-day at-the-money (ATM) straddle pricing for NDX and the ATM straddle overpriced the CPI reaction five of the last twelve reports, resulting in cumulative losses of just over 479 points for straddle sellers.
Sources: Barchart.com and Author Calculations
Last month’s 4.19% drop was the biggest move on CPI-day for NDX in either direction over the past year. It also ended a four-report winning streak for NDX on CPI-day. We always like to note that traders have short memories, and the outlier move last month may result in elevated premiums in front of this month’s report.
Sources: Barchart.com and Author Calculations
As noted in the table above, NDX 1-day ATM straddle sellers would realize net losses over the past year. A good portion of those losses occurred last month with the straddle priced at 491.80 and settled at 746.43 for a net loss of 254.63. Similar losses occurred in July and December 2024.
Sources: Barchart.com and Author Calculations
Over the past year, NDX has been more reactionary to the CPI releases than PPI. The table below summarizes NDX price action on PPI-day. The average price change for NDX on PPI-day is +/-1.01%, lower than the average price change for all days over the same period of +/-1.06%. NDX reacted favorably to PPI, gaining 1.89% last month. Finally, the NDX 1-day ATM straddle has overpriced the subsequent move six of twelve reports. A consistent seller of the ATM straddle would net just over 45 points, an improvement over CPI results.
Sources: Barchart.com and Author Calculations
As noted, NDX reactions to the PPI release have been less volatile. However, the past three reports resulted in outlier moves relative to the +/-1.01% average move. The recent reactions may elevate NDX option premiums for this month’s report.
Sources: Barchart.com and Author Calculations
Last month, the ATM straddle pricing was elevated relative to history, something that is attributed to the excess market volatility associated with day-to-day tariff news. However, the net result was a profit of 127.40, more than the cumulative profit of 45.32, meaning that prior to last month’s report, option sellers on PPI had net losses.
Sources: Barchart.com and Author Calculations
