tastylive logo
Five Futures in Focus

Oct 11, 2023

Nasdaq 100 Futures Rally as the Fed Signals the End of Rate Hikes

By:Christopher Vecchio - CFA

Also, 10-year T-note, gold, crude oil, and British pound futures

Fig. 1: Intraday price percent change chart for /NQ, /ZN, /GC, /CL, and /6B
Fig. 1: Intraday price percent change chart for /NQ, /ZN, /GC, /CL, and /6B

This Morning’s Five Futures in Focus:

  1. Nasdaq 100 E-mini Futures (/NQ): +0.32%
  2. 10-Year T-Note Futures (/ZN): +0.29%
  3. Gold Futures (/GC): +0.52%
  4. Crude Oil Futures (/CL): -0.75%
  5. British Pound Futures (/6B): -0.22%

Markets continue to stay focused on the latest developments in the Israeli-Hamas conflict as a U.S. carrier strike group arrives in the Eastern Mediterranean. Coupled with a slew of Federal Reserve officials signaling the end of the rate hike cycle is here—no more hikes in 2023, meaning the final hike was in July—U.S. bonds continue to rally off their recent cycle lows. The Federal Open Market Committee, or FOMC, r today at 2 p.m. EDT, and the U.S. inflation report is due tomorrow at 8:30 a.m. EDT.

Symbol: Equities

Daily Change

/ESZ3

+0.22%

/NQZ3

+0.32%

/RTYZ3

+0.01%

/YMZ3

+0.22%

A minor sell-off in the second half of the trading day yesterday has been rebuffed thus far today. At the time this note was written, each of the four major U.S. equity index futures are trading modestly higher, barely below their weekly highs. The bond market remains the boss, however, as the rolling one-month correlation between 30s (/ZBZ3) and each of the S&P 500 (/ESZ3), the Russell 2000 (/RTYZ3) and the Dow Jones 30 (/YMZ3) remains north of 0.85.

Strategy: (37DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 14800 p

Short 14900 p

Short 15700 c

Long 15800 c

37%

+1230

-770

Long Strangle

Long 14800 p

Long 15800 c

37%

x

-7195

Short Put Vertical

Long 14800 p

Short 14900 p

70%

+530

-1470

/NQZ3

Symbol: Bonds

Daily Change

/ZTZ3

-0.03%

/ZFZ3

+0.07%

/ZNZ3

+0.29%

/ZBZ3

+1.28%

/UBZ3

+1.58%

A parade of Federal Reserve officials in recent days has laid the groundwork for making no additional rate hikes in 2023. In what has now been a familiar refrain, the long-end of the curve (30s (/ZBZ3) and ultras (/UBZ3)) continue to lead the way. However, the September FOMC meeting minutes may throw a wrinkle into the bullish price action because at the time of the meeting, U.S. Treasury yields hadn’t made their jump to new cycle highs. Hawkish commentary is expected.

Strategy (44DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 106 p

Short 106.5 p

Short 109.5 c

Long 110 c

39%

+281.25

-218.75

Long Strangle

Long 106 p

Long 110 c

39%

x

-984.38

Short Put Vertical

Long 106 p

Short 106.5 p

76%

+140.63

-359.38

/ZNZ3

Symbol: Metals

Daily Change

/GCZ3

+0.52%

/SIZ3

+1.01%

/HGZ3

-0.26%

A further retrenchment in U.S. Treasury yields and the U.S. dollar is proving to be the antidot precieous metals have needed to halt their startling declines at the end of September and beginning of October. Gold (/GCZ3) is up more than 3% from last week’s lows, while silver (/SIZ3) is up more than 5% over that same time period. The September U.S. inflation report tomorrow is the next major catalyst for the metals.

Strategy (47DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 1860 p

Short 1870 p

Short 1900 c

Long 1910 c

32%

+780

-220

Long Strangle

Long 1860 p

Long 1910 c

22%

x

-4460

Short Put Vertical

Long 1860 p

Short 1870 p

72%

+420

-580

/GCZ3

Symbol: Energy

Daily Change

/CLZ3

-0.75%

/NGZ3

-0.14%

Crude oil (/CLZ3) is taking a step backward in the middle of the week as concerns over a significant geopolitical spillover from the Mideast conflict appear to have been diminished. Iranian leaders have steadfastly denied direct involvement in the planning of this past weekend’s atrocities, effectively ringfencing the near-term trajectory of fighting to Israel and Gaza. Volatility remains exceptionally higher, with the IVR in /CLV3 holding near 50.

Strategy (35DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 80 p

Short 80.5 p

Short 86.5 c

Long 87 c

23%

+360

-140

Long Strangle

Long 80 p

Long 87 c

45%

x

-4970

Short Put Vertical

Long 80 p

Short 80.5 p

60%

+190

-310

/CLZ3

Symbol: FX

Daily Change

/6AZ3

-0.12%

/6BZ3

+0.22%

/6CZ3

-0.09%

/6EZ3

+0.06%

/6JZ3

-0.16%

The ongoing pullback in U.S. Treasury yields continues to undermine the U.S. dollar, but so does the rebound in broader risk appetite. The greenback has benefited in recent weeks as the preferred safe haven of sorts during the swing lower in global equities, thanks to its relative yield advantage. The British pound (/6BZ3) has emerged as a winner today following a 10-year Gilt auction that fetched 4.444% vs. 4.402% previously.

Strategy (58DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 1.21 p

Short 1.215 p

Short 1.245 c

Long 1.25 c

32%

+200

-112.50

Long Strangle

Long 1.21 p

Long 1.25 c

41%

x

-1000

Short Put Vertical

Long 1.21 p

Short 1.215 p

75%

+93.75

-218.75

/6BZ3

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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2023 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on tastylive.com apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.