Squawk Morning Briefing: Volatility Cocktail

With the anticipation that today might be the kind of trading day which induces one to drink we present our recipe for volatility cocktail.  This delight only works with the freshest expiring options so only serve while in season.

Ingredients:

• Zest of political competition
• 2 dashes partisan bitters
• 1 cube sweet optimism
• Jigger stock index futures
• Jigger index options
• Jigger Stock and stock index ETF options
• 1 Tbs low liquidity
• Generous splash of old grandstanding

Directions:

Muddle the first three ingredients until the scent of the optimism is fully released (1 to 2 months).  Add futures and options and stir until they become frothy in reaction to the optimism.  Just before serving add the low liquidity (often found in overnight futures trading) and the grandstanding and stir until the mixture fractures as the futures and options separate.  Pour over ice and serve to unsuspecting guests on expiration day.

Just as there is a difference between morning milk and evening milk, the difference between index futures with morning settlement and stock and ETF options which settle based on afternoon prints is important to get the full dramatic effect of the Volatility Cocktail.  The futures and options will react with each other all day long for an often wild and unforgettable time that can only be experienced and not described.

Anything can happen today.  Enjoy.

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