Hot Rolled Futures: Summer Months Bring Lower Implied Volatility, Lower Trading Volumes

The following article on the hot rolled coil (HRC) steel and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:

Hot rolled futures volumes have been a bit uneven as forecast uncertainty remains while businesses continue to navigate through a difficult summer due to a strong surge of Covid infections, which appear to have hampered the recovery of operations during the typically slower summer period. It seems that ramping production back up is taking longer than expected, which is reducing forecasted futures needs.  In the last month, implied volatilities have moved lower.  With the exception of the nearby futures months, the HR futures curve has remained relatively stable from Oct’20 HR through Jun’21 HR futures with about $10/ST separating the quarters ($535-$545/ST).  For example : The Q1’21 HR versus Q2’21 HR futures spread traded at 6 contango mid-week in some decent volume  ($538/$544).