This Morning’s Five Futures in Focus
- Nasdaq 100 E-mini Futures (/NQ): +0.52%
- 30-Year T-Bond Futures (/ZB): +0.55%
- Copper Futures (/HG): +0.13%
- Crude Oil Futures (/CL): +0.09%
- Australian Dollar Futures (/6A): +0.05%
The improvement in risk appetite following Federal Reserve Chair Jerome Powell’s speech in Jackson Hole, Wyoming, has continued into the start of trading this week, with all four major U.S. equity indexes trading higher and the U.S. dollar softening across the board. But the more important catalyst may be news from China, where a slew of measures were announced overnight to help ease concerns in equity markets about the Chinese property debt bubble bursting.
|
Symbol: Equities |
Daily Change |
|
/ESU3 |
+0.39% |
|
/NQU3 |
+0.52% |
|
/RTYU3 |
+0.41% |
|
/YMU3 |
+0.41% |
The pullback in interest rates is filtering through to the two more rate-sensitive indexes, the Nasdaq 100 (/NQU3) and the Russell 2000 (/RTYU3), which are the top two performing U.S. equity index futures at the start of the week. Having reached significant regions of technical support last week, and with holiday-fueled thinner liquidity conditions having arrived, it may be that range trading conditions begin to prevail in the short-term.
|
Strategy: (17DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 14850 p Short 14900 c Short 15200 c Long 15250 c |
22% |
+765 |
-235 |
|
Long Strangle |
Long 14850 p Long 15250 c |
44% |
x |
-6440 |
|
Short Put Vertical |
Long 14850 p Short 14900 c |
62% |
+340 |
-660 |
|
Symbol: Bonds |
Daily Change |
|
/ZTU3 |
0.00% |
|
/ZFU3 |
+0.10% |
|
/ZNU3 |
+0.26% |
|
/ZBU3 |
+0.55% |
|
/UBU3 |
+0.67% |
Fed Chair Powell may have sounded hawkish on Friday, but by stopping short of promising a rate hike in September—a talking point reinforced by the slew of other Federal Open Market Committee (FOMC) members over the past few days—U.S. Treasury bonds have rebounded across the curve. Led by the long-end, the 2s10s spread has seen a deeper inversion take root, falling back to -85.9-basis points (bps). “Higher for longer,” or at least “staying at a high level for longer,” may mean yield curve steepening trades could struggle in the near-term.
|
Strategy (0DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 119 p Short 119.5 p Short 121.5 c Long 122 c |
26% |
+359.38 |
-140.63 |
|
Long Strangle |
Long 119 p Long 122 c |
42% |
x |
-1921.88 |
|
Short Put Vertical |
Long 119 p Short 119.5 p |
65% |
+171.88 |
-328.13 |
|
Symbol: Metals |
Daily Change |
|
/GCV3 |
+0.23% |
|
/SIU3 |
-0.02% |
|
/HGU3 |
+0.13% |
A softer U.S. dollar and lower U.S. Treasury yields should be good for commodity prices, particularly metals. Gold (/GCV3) has inched higher, while silver (/SIU3) has oscillated between positive and negative territory. But copper (/HGU3) may be more interesting to watch in the coming days, given its role as a significant China-proxy. If traders are truly feeling more optimistic about the Chinese government’s efforts to turn the tides of sentiment, then /HGU3 will be show it by trading higher over the coming days; today’s +0.13% gain, thus far, leaves a lot to be desired.
|
Strategy (0DTE, 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 |
Energy markets are trading firmer at the start of the week, with crude oil (/CLV3) advancing modestly. But the focus is quickly shifting to natural gas supplies, especially in Europe, where energy inventory insecurity has become a concern as the summer months wind down. Reports that Norwegian natural gas flows have been lower than anticipated has lifted natural gas prices both in Europe and in North America, with /NGU3 posting a near +6% gain on Monday.
|
Strategy (0DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 79.25 p Short 79.5 p Short 80 c Long 80.25 c |
27% |
+180 |
-70 |
|
Long Strangle |
Long 79.5 p Long 80 c |
48% |
x |
-620 |
|
Short Put Vertical |
Long 79.25 p Short 79.5 p |
64% |
+90 |
-160 |
|
Symbol: FX |
Daily Change |
|
/6AU3 |
+0.05% |
|
/6BU3 |
0.00% |
|
/6CU3 |
-0.05% |
|
/6EU3 |
+0.03% |
|
/6JU3 |
-0.08% |
Lower U.S. Treasury yields are undercutting the U.S. dollar at the start of the trading week, with the DXY Index down by 0.08% at the time this note was written. For the sake of keeping an eye on how markets are treating the news from China, it’s worth noting that that the Australian dollar (/6AU3), a non-DXY component, is the best performing major currency vs. the buck. As with copper, the lack of significant upside in /6AU3 suggests traders are not ready to embrace the Chinese government’s market support measures as a significant turning point.
|
Strategy (11DTE, ATM) |
Strikes |
POP |
Max Profit |
Max Loss |
|
Iron Condor |
Long 0.635 p Short 0.6375 p Short 0.6475 c Long 0.65 c |
38% |
+140 |
-110 |
|
Long Strangle |
Long 0.635 p Long 0.65 c |
36% |
x |
-420 |
|
Short Put Vertical |
Long 0.635 p Short 0.6375 p |
70% |
+70 |
-180 |
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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