Hawkish Tone Sends Markets into Selloff Mode
The stock market reacted to the hawkish tone of Fed Chair Kevin Warsh's keynote speech at Jackson Hole, with a classic front-end selloff. The 2-year Treasury yield jumped over 8 basis points to its highest level since July, while the 30-year actually ticked down slightly.
This reaction was reflected in the options market for Apple (AAPL) stock. A contract for AAPL's December 2026 option with a strike price of $320 showed significant trading activity. The contract's intrinsic value is 1.54, and its extrinsic value is 0.37.
The delta of this contract is 0.6865, indicating that it has some volatility built in. The gamma is 168.79, which suggests a high sensitivity to changes in the underlying stock price. However, the theta is 0.0010, showing relatively low time decay. The rho is 115.88, indicating a positive correlation with interest rates.
Warsh emphasized that the central bank has 'work to do' to bring inflation down, which may have contributed to the market's hawkish reaction.