Traders are Turning to Safe-Haven Commodities as Tension Escalates in the Mideast
Traders are Turning to Safe-Haven Commodities as Tension Escalates in the Mideast
Also, five-year T-notes, gold, crude oil and eurodollar futures
- S&P 500 e-mini futures (/ES): -0.25%
- Five-year T-note futures (/ZN): +0.34%
- Gold Futures (/GC): +0.50%
- Crude oil (/CL): +0.80%
- Eurodollar futures (/6E): +0.06%
U.S. equity futures fell as crude oil and gold prices rose this morning as investors focused on the Middle East, where tensions continued to rise. The Pentagon confirmed multiple attacks on American troops before President Biden addressed the nation last night in only his second Oval Office speech of his presidency. Traders will continue to digest corporate earnings figures, but the risk-off tone is likely to carry into the weekend, which should keep a bid on bonds, precious metals and crude oil.
Symbol: Equities | Daily Change |
/ESZ3 | -0.20% |
/NQZ3 | -0.21% |
/RTYZ3 | -0.14% |
/YMZ3 | -0.20% |
The S&P 500 is down about 1.5% this week, putting bulls on the back foot going into the weekend, especially given the broader risk-off theme across financial markets. So far, corporate earnings have been mixed but tensions in the Middle East have sent traders into crude oil and gold, which is sucking capital away from stocks. /ESZ3 traded about 0.2% lower at the opening bell.
Strategy: (41DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 4230 p Short 4240 p Short 4360 c Long 4370 c | 18% | +395 | -100 |
Long Strangle | Long 4230 p Long 4370 c | 50% | x | -6,650 |
Short Put Vertical | Long 4230 p Short 4240 p | 60% | +162.50 | -337.50 |
Symbol: Bonds | Daily Change |
/ZTZ3 | +0.09% |
/ZFZ3 | +0.28% |
/ZNZ3 | +0.40% |
/ZBZ3 | +0.41% |
/UBZ3 | +0.08% |
Treasury yields are lower across the curve this morning as traders digest Federal Reserve Chair Jerome Powell’s latest commentary against a backdrop of rising hostilities across the Middle East. Despite today’s buying in the 10-year note, its yield is on track for the largest weekly percentage increase since December.
Strategy (35DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 104.5 p Short 105 p Short 106.5 c Long 107 c | 27% | +359.38 | -140.63 |
Long Strangle | Long 104.5 p Long 107 c | 44% | x | -1,230 |
Short Put Vertical | Long 104.5 p Short 105 p | 70% | +156.25 | -343.75 |
Symbol: Metals | Daily Change |
/GCZ3 | +0.48% |
/SIZ3 | +1.10% |
/HGZ3 | -0.93% |
Gold prices are nearing the $2,000 per troy ounce level this morning, with (/GCZ3) up about 0.5%, extending its weekly gain. Geopolitical tensions continue to fuel inflows as investors de-risk their portfolios. Gold is nearing overbought levels on a technical basis and there may be incentives to take some profits, but investors will likely wait until after the weekend, since the asset offers a safe haven compared to equities.
Strategy (38DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1965 p Short 1970 p Short 2020 c Long 2025 c | 20% | +390 | -110 |
Long Strangle | Long 1965 p Long 2025 c | 46% | x | -5,650 |
Short Put Vertical | Long 1965 p Short 1970 p | 61% | +230 | -270 |
Symbol: Energy | Daily Change |
/CLZ3 | +1.22% |
/NGZ3 | -1.18% |
Crude oil prices (/CLZ3) are flirting with the $90 per barrel level this morning after the Department of Defense noted increased activity across Syria and Iraq, including the targeting of American troops. Elsewhere in oil markets, India has rejected a request by Russia to pay for oil in yuans amid increasing tensions between Beijing and New Delhi.
Strategy (39DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 84.5 p Short 85 p Short 91 c Long 91.5 c | 17% | +400 | -100 |
Long Strangle | Long 84.5 p | 47% | x | -8,200 |
Short Put Vertical | Long 84.5 p Short 85 p | 75% | +240 | -260 |
Symbol: FX | Daily Change |
/6AZ3 | -0.16% |
/6BZ3 | +0.14% |
/6CZ3 | +0.28% |
/6EZ3 | +0.12% |
/6JZ3 | -0.05% |
Last week, traders were starting to make eurodollar parity calls, but despite an increase in Treasury yields this week, the euro (/6EZ3) rose nearly a full percentage point this week, and prices are bidding higher this morning. However, the currency remains at risk, given the fundamental backdrop of tepid European economic growth.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.045 p Short 1.05 p Short 1.06 c Long 1.065 c | 32% | +400 | -225 |
Long Strangle | Long 1.045 p Long 1.065 c | 40% | x | -1,400 |
Short Put Vertical | Long 1.045 p Short 1.05 p | 73% | +200 | -425 |
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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