With risk-off gripping markets across all asset classes, market volatility has increased dramatically. The VIX index, which measures the implied volatility of put and call options on the S&P 500 stocks, rose to its highest level since December 2008 when it moved to 61.62 on March 9. Options are price insurance, and market participants typically flock to the options market to protect positions when risk levels rise.
After the Fed cut interest rates three times for a total of 75 basis points in 2019, the price of lumber began to rise. Lower rates tend to increase the demand for new housing as mortgage rates decline. Nearby lumber prices rose steadily starting in late May 2018 when the price hit a low of $286.10 per 1,000 board feet. In mid-February, the price of wood on the futures market was knocking on the door at the $470 level. The CatchMark Timber Trust (CTT) owns timberland throughout the United States. As of Monday, March 9, the price of May lumber futures settled at $356.70 per 1,000 board feet, 25.3% below the high from February 20.
CTT owns wood
The CatchMark Timber Trust, headquartered in Atlanta, Georgia, strategically harvests its high-quality timberlands to supply lumber to the market. CTT began operations in 2007 and owns interests in 1.5 million acres of timberlands in Alabama, Florida, Georgia, North Carolina, Oregon, South Carolina, Tennessee, and Texas. The Trust has a market cap of $405.085 million and trades an average of 201,877 shares each day, making it a liquid product. The price of CTT shares correlates well with the price of lumber futures over time. In September 2015, the price of lumber hit a low of $214.40 per 1,000 board feet. In August of the same year, CTT traded to a low of $7.90 per share. In May 2018, when the price of lumber reached an all-time high of $659 per 1,000 board feet, CTT shares rallied to a peak of $13.73 in
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