Also ultra bond, copper, crude oil, and Japanese yen futures
- Nasdaq 100 e-mini futures (/NQ): +0.84%
- Ultra T-bond futures (/UB): -0.66%
- Copper futures (/HG): +1.39%
- Crude oil (/CL): +1.13%
- Japanese yen futures (/6J): +0.33%
A rough week is nearly over, with U.S. equity index futures poised to open higher.
Disappointing earnings releases coupled with swelling geopolitical event risk surrounding the Israel-Hamas war obliterated investor sentiment. Fed rate hike odds have subsided. Bond markets are showing some stability, at least at the front end of the curve. But with another weekend around the corner, one can’t help but wonder if a repeat of the past two weeks is afoot: geopolitical war hedges come into play, whereby traders sell down stocks and bid up bonds, metals, and energy before the week ends.
|
Symbol: Equities |
Daily Change |
|
/ESZ3 |
+0.40% |
|
/NQZ3 |
+0.84% |
|
/RTYZ3 |
+0.19% |
|
/YMZ3 |
+0.02% |
Amazon’s (AMZN) better-than-expected earnings results are providing much-needed relief for markets after a bevy of tech earnings in recent days has kneecapped the Magnificent Seven. The Nasdaq 100 (/NQZ3) is leading the way higher in attempt to salvage what has been an awful week: the past two weeks have produced the worst back-to-back performances since mid-September 2022.
|
Strategy: (34DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 13900 p Short 14000 p Short 14600 c Long 14700 c |
26% |
+1430 |
-570 |
|
Long Strangle |
Long 13900 p Long 14700 c |
44% |
x |
-9255 |
|
Short Put Vertical |
Long 13900 p Short 14000 p |
63% |
+625 |
-1375 |
|
Symbol: Bonds |
Daily Change |
|
/ZTZ3 |
+0.02% |
|
/ZFZ3 |
+0.04% |
|
/ZNZ3 |
-0.06% |
|
/ZBZ3 |
-0.43% |
|
/UBZ3 |
-0.66% |
Twisting Treasury yields
The U.S. Treasury yield curve is twisting again this morning, with front-end rates down and long-end rates up. As has often been the case in recent weeks, 30s (/ZBZ3) and ultras (/UBZ3) are down on the session. The 2s10s spread—the difference between 10-year and two-year yields—is now at -17.1 basis points (bps). A better-than-expected seven-year note auction yesterday has helped calm down fears about investors thinking that the Federal Reserve would be raising rates again in the coming months.
|
Strategy (xDTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
x |
x |
x |
x |
|
Long Strangle |
x |
x |
x |
x |
|
Short Put Vertical |
x |
x |
x |
x |
|
Symbol: Metals |
Daily Change |
|
/GCZ3 |
-0.13% |
|
/SIZ3 |
+0.03% |
|
/HGZ3 |
+1.39% |
Copper rises
Higher Treasury yields are sapping strength in precious metals but copper prices (/HGZ3) are rising as traders assess the most recent U.S. GDP report and how it might translate into future strength in the global economy.
The metal is also coming off 11-month lows, which could be enticing investors to take a stab at a long position. Whether speculative or fundamentally driven, copper prices might be due for a retracement to the upside.
|
Strategy (31DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 3.59 p Short 3.6 p Short 3.67 c Long 3.68 c |
17% |
+212.50 |
-37.50 |
|
Long Strangle |
Long 3.59 p Long 3.68 c |
45% |
x |
-2737.50 |
|
Short Put Vertical |
Long 3.59 p Short 3.6 p |
60% |
+100 |
-150 |
|
Symbol: Energy |
Daily Change |
|
/CLZ3 |
+1.13% |
|
/NGZ3 |
+2.76% |
Crude oil rebounds
Crude oil prices (/CLZ3) rebounded Friday morning as Israel intensified its military offensive in the Middle East. Despite higher oil prices, however, energy-related stocks may weaken today after ExxonMobil (XOM) and Chevron (CVX) posted disappointing earnings results. That weakness may move through the S&P 500’s energy sector, which would be reflected in XLE.
Meanwhile, traders are assessing the long-term outlook as analysts digest a move by China to limit the country’s refining capacity.
|
Strategy (19DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 82 p Short 82.5 p Short 87 c Long 87.5 c |
21% |
+410 |
-90 |
|
Long Strangle |
Long 82 p Long 87.5 c |
30% |
x |
-7460 |
|
Short Put Vertical |
Long 82 p Short 82.5 p |
54% |
+380 |
-370 |
|
Symbol: FX |
Daily Change |
|
/6AZ3 |
+0.32% |
|
/6BZ3 |
-0.02% |
|
/6CZ3 |
-0.10% |
|
/6EZ3 |
-0.09% |
|
/6JZ3 |
+0.33% |
Yen bounces higher
Japanese yen futures (/6JZ3) bounced higher this morning from 33-year lows as currency traders watch for signs of intervention from Tokyo. Some broader dollar weakness is also helping to lift prices as traders shift back into risk assets going into the weekend. The Bank of Japan (BoJ) is set to release a policy decision next week, when some expect that the bank could signal or abandon its yield control policy.
|
Strategy (42DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 0.0065 p Short 0.0655 p Short 0.00695 c Long 0.007 c |
67% |
+125 |
-500 |
|
Long Strangle |
Long 0.0065 p Long 0.007 c |
20% |
x |
-325 |
|
Short Put Vertical |
Long 0.0065 p Short 0.0655 p |
86% |
+75 |
-550 |
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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