• Home
  • Pro
  • Partners
  • Help and support
  • English
  • عربي
Pepperstone logo
Pepperstone logo
  • Ways to trade
    • Trading accounts

      Choose from two account types depending on your strategy

    • Premium clients

      Exclusive rewards and bespoke benefits for high-vol traders

    • Pricing

      Discover our tight spreads, plus all other possble fees

    • Professional
    • Active trader program
    • Refer a friend
    • Demo trading
    • Trading hours
    • 24-hour trading
    • Maintenance schedule
    • Risk management
  • Markets
    • Forex

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Commodities

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Cryptocurrencies

      Speculate on Bitcoin, Ether and more, with a trusted broker

    • Shares
    • ETFs
    • Indices
    • Currency indices
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
  • Trading platforms
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader 4
    • cTrader
    • Trading tools
    • Integrations
  • Market analysis
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Meet the analysts

      Our global team giving your trading the edge

  • About us
    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online
    • Trading accounts

      Choose from two account types depending on your strategy

    • Premium clients

      Exclusive rewards and bespoke benefits for high-vol traders

    • Pricing

      Discover our tight spreads, plus all other possble fees

    • Professional
    • Active trader program
    • Refer a friend
    • Demo trading
    • Trading hours
    • 24-hour trading
    • Maintenance schedule
    • Risk management
    • Forex

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Commodities

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Cryptocurrencies

      Speculate on Bitcoin, Ether and more, with a trusted broker

    • Shares
    • ETFs
    • Indices
    • Currency indices
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader 4
    • cTrader
    • Trading tools
    • Integrations
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Meet the analysts

      Our global team giving your trading the edge

    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online
Oil

The Daily Fix: Oil volatility is a sight to behold

Chris Weston
Chris Weston
Head of Research
22 Apr 2020
Share
The bears are certainly getting the upper hand, and today's Asian open is looking fairly dicey as the various indices start to unwind.

The bears are certainly getting the upper hand, and today's Asian open is looking fairly dicey as the various indices start to unwind.

While we’ve seen the USD outperform, I can’t go past moves in the options markets, with oil volatility (vol) moving like a freight train, and there are a few charts that suggest trading in a more defensive tone for now. I won’t go through all the news flow, as price tells the clearest story here and maybe I’ll cover off on most the news and views in tonight’s webinar, which if you haven’t sign up for and are keen.

Once again, when it comes to focal points, the session belonged to crude and while we saw June crude trade into $6.50 (our ‘spot’ crude price traded to $3.39), and we’ve seen June Brent crude into $17.51. The move in implied vols that have materialised have been incredible.

The CBoE oil volatility index for example, traded in a monster range of 517 to 213 today, although it ultimately closed up an impressive 99-vols on the day at 325.

This implies that crude will move (higher or lower) by 20% a day. So, consider since the futures re-set June crude is +21% and July 13% and despite this being an incredible percentage change, it feels effortless.

Vol chart

"Source: Bloomberg"

The ICE exchange has announced they are preparing the Brent futures to accept negative prices, so that is one to watch as we head towards expiry on 30 April. Although the June WTI expiry on 19 May will be the main event.

If we look at the crude 1-month risk reversals - that being the difference between 1-month crude 25-delta call volatility minus put volatility, we’ve seen it blow out to -78 vols. That is an insane move. Options traders are saying if there is a move the downside move is going to be far greater than any upside move.

Crude chart

Let’s take the near-term storage issues out of the equation and look further out the crude curve, at say the 5th-month futures (October contract). I like this part of the curve as it removes a lot of the near-term storage issues that are playing into the front-month futures.

As we can see, price never really took off from the March lows, or should I say it did but now it has rolled over hard. Clearly, the lack of follow-through highlights that crude wasn’t affected by the Fed’s buy everything program, in the same way, equities and credit have.

That said, when crude collapsed in January, the S&P 500 followed. When 5th-month crude rallied in March, the S&P 500 followed. Could this be a sign the S&P 500 is to follow? Maybe this tells a far clearer story of future demand and economics.

Index chart

Inflation expectation rolling over - This chart also throws weight to the notion that volatility is going to stay high and that I should be trading on the defensive side of the ledger. For perspective, from the March lows US 5-year inflation expectations/’breakevens’ (blue) moved sharply higher and this put a backbone, not just into the S&P 500 (orange), but gold too – which I have left off. US 5yr Treasury yields (white) remained anchored through the move, with the Fed ramping up its QE program and no one is going to fight the Fed here – as inflation expectations moved up faster than bond yields we saw ‘real’ yields falling and this not only boosted the equity market but weakened the USD.

Yields chart

Maybe it’s been driven by crude, but inflation expectations are now rolling over hard and this is boosting real yield. This could be very influential to the risk trade, as well as where to for the USD.

(Blue – USDX, white – US real yields)
USDX chart

In terms of FX vols, we’ve seen a slight move in petro-currency volatility, but they haven't been as punchy as I would expect. This is also quite interesting, as I would certainly have expected vols to ramp up and FX traders are taking a calm approach to the madness seen in crude markets.

FX volatility chart

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

Get startedSubscribe to The Daily Fix

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Premium clients
  • Active trader program
  • Refer a friend
  • Trading hours

Platforms

  • Trading platforms
  • Trading tools

Markets and Symbols

  • Forex
  • Shares
  • ETFs
  • Indicies
  • Commodities
  • Currency indicies
  • Cryptocurrencies
  • CFD forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Meet the Analysts

Learn to trade

  • Trading Guides
  • Videos
  • Webinars
Pepperstone logo
support.ae@pepperstone.com
+97145734100
Al Fattan Currency House
Level 15, Office 1502 A, Tower 2
P.O.Box 482087, DIFC
Dubai, United Arab Emirates
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy
  • Whistleblower policy
  • Sitemap

© 2025 Pepperstone Financial Services (DIFC) Limited

Risk warning: Trading CFDs and FX carries significant risk. Trading OTC derivatives may not be suitable for everyone so please ensure that you fully understand the risks involved and take care to manage your exposure. You have no ownership of the underlying asset. Pepperstone Financial Services (DIFC) Limited does not issue advice, recommendations or opinion in relation to acquiring, holding or disposing of OTC derivatives nor is Pepperstone a financial advisor. All services are provided on an execution only basis. Pepperstone Financial Services (DIFC) Limited only provides information of a general nature and does not take into account your financial objectives, personal circumstances. We recommend that you seek independent personal financial or legal advice.

The information on this site and the products and services offered are not intended for distribution to any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Pepperstone Financial Services (DIFC) Limited is registered at Al Fattan Currency House, Tower 2, Level 15, Office 1502 A, P. O. Box 482087, DIFC, Dubai, United Arab Emirates and is regulated by the DFSA under license number F004356.

The product issuer is Pepperstone Group Limited registered at Level 16, Tower One, 727 Collins St, Docklands, Victoria 3008, Australia and is licensed and regulated by the Australian Securities and Investments Commission, AFSL 414530. You should consider whether you are part of the product issuer’s target market by reviewing the TMD, and read the PDS and other legal documents to ensure you fully understand the risks before you make any trading decisions.