S&P 500 Gaps Higher at Start of Big Macro, Earnings Week
S&P 500 E-mini futures (/ES): +0.27%
2-year T-note futures (/ZT): +0.03%
Copper futures (/HG): +0.72%
Natural gas futures (/NG): +1.51%
Japanese yen futures (/6J): +0.83%
U.S. financial markets are staring down a busy week, but that isn’t preventing a solid start out of the gate. More of the so-called Magnificent Seven stocks will see earnings releases this week (Amazon (AMZN) and Apple (AAPL)), while the May Federal Open Market Committee (FOMC) meeting and April U.S. jobs report will define the macro side of the ledger. Details on Treasury financing intentions for 2Q ’24 are due later today. Elsewhere, rumors of an intervention in FX markets are afoot after the Japanese yen touched its lowest level since 1990.
Symbol: Equities | Daily Change |
/ESM4 | +0.27% |
/NQM4 | +0.43% |
/RTYM4 | +0.38% |
/YMM4 | +0.16% |
U.S. equity futures climbed to start the week, adding to last week’s positive performance. S&P 500 futures (/ESM4) rose 0.24% ahead of the opening bell, reaching its highest level since April 17. Tesla (TSLA) surged nearly 14% in pre-market trading after the electric car company cleared a milestone in China that will allow its self-driving software in the country and potentially boost sales. Earnings season will continue this week, with Apple, Amazon and Advanced Micro Devices (AMD) reporting. The non-farm payrolls report will wrap up the week on Friday.
Strategy: (46DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 4850 p Short 4875 p Short 5425 c Long 5450 c | 67% | +255 | -995 |
Short Strangle | Short 4875 p Short 5425 c | 72% | +1887.50 | x |
Short Put Vertical | Long 4850 p Short 4875 p | 86% | +137.50 | -1112.50 |
Symbol: Bonds | Daily Change |
/ZTM4 | +0.03% |
/ZFM4 | +0.11% |
/ZNM4 | +0.19% |
/ZBM4 | +0.44% |
/UBM4 | +0.47% |
Bond yields fell across the curve to start the week. The policy-sensitive two-year T-note (/ZTM4) rose 0.03%, helping to clear the way for some upside in risk assets. It’s a light week for the Treasury, with only short-term bill auctions on the schedule. That will leave traders focused on this week’s Federal Reserve meeting, economic data and corporate earnings. Also in focus is today’s quarterly refunding announcement. The Treasury is expected to keep the size of its upcoming auctions steady following several quarters of increased sizes. That could help lift the price of Treasuries by limiting the supply and helping to dampen yields.
Strategy (53DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 100.5 p Short 100.75 p Short 102.75 c Long 103 c | 56% | +93.75 | -406.25 |
Short Strangle | Short 100.75 p Short 102.75 c | 61% | +265.63 | x |
Short Put Vertical | Long 100.5 p Short 100.75 p | 97% | +46.88 | -453.13 |
Symbol: Metals | Daily Change |
/GCM4 | -0.12% |
/SIN4 | -0.14% |
/HGN4 | +0.72% |
Gold prices (/GCM4) are steady this morning as traders await the Federal Reserve rate decision that may bring more clues about when the Fed expects to cut rates for the first time. Yesterday delivered a shock to the narrative with gross domestic product data (GDP), although traders may shake off stagflation concerns, given a misleading headline. The jobs data on Friday is also key to the precious metal’s direction, and while gold remains higher on the year, if rate cut expectations are pushed back it could hurt the metal.
Strategy (57DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 4.15 p Short 4.3 p Short 5 c Long 5.15 c | 58% | +1275 | -2475 |
Short Strangle | Short 4.3 p Short 5 c | 66% | +3225 | x |
Short Put Vertical | Long 4.15 p Short 4.3 p | 78% | +675 | -3075 |
Symbol: Energy | Daily Change |
/CLM4 | -0.76% |
/HOM4 | +0.12% |
/NGM4 | +1.51% |
/RBM4 | -0.02% |
Crude oil futures (/CLM4) dropped as ceasefire talks moved forward in Cairo, denting the geopolitical premium priced into the commodity. Along with the Federal Reserve decision and jobs report, dollar direction and yields will likely influence prices this week. Traders also have their eyes on inventory reports for the United States.
Strategy (57DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.8 p Short 1.85 p Short 2.7 c Long 2.75 c | 67% | +130 | -370 |
Short Strangle | Short 1.85 p Short 2.7 c | 74% | +780 | x |
Short Put Vertical | Long 1.8 p Short 1.85 p | 87% | +60 | -440 |
Symbol: FX | Daily Change |
/6AM4 | +0.26% |
/6BM4 | +0.24% |
/6CM4 | -0.03% |
/6EM4 | +0.02% |
/6JM4 | +0.83% |
Japanese Yen futures (/6JM4) shot higher this morning in volatile trading that has traders looking at Japanese policymakers and thinking there was an intervention in the currency. Masato Kanda, Japan’s foreign-exchange chief, denied allegations of an intervention, although Dow Jones reported just that, according to sources familiar with the matter. Traders remain overwhelmingly short the currency, according to data released Friday by the Commodity Futures Trading Commission (CFTC). However, several funds have been building long positions in the currency. The main threat to the yen is that U.S. rate cut expectations get pushed back.
Strategy (39DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 0.0062 p Short 0.00625 p Short 0.00665 c Long 0.0067 c | 63% | +175 | -450 |
Short Strangle | Short 0.00625 p Short 0.00665 c | 70% | +600 | x |
Short Put Vertical | Long 0.0062 p Short 0.00625 p | 84% | +87.50 | -537.50 |
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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