Nasdaq 100 Weighed by Continued Weakness in Bonds
Nasdaq 100 Weighed by Continued Weakness in Bonds
Also, 10-year T-note, copper, natural gas and euro futures
Nasdaq 100 e-mini futures (/NQ): -0.19%
10-year T-note futures (/ZN): -0.14%
Copper futures (/HG): +2.09%
Natural gas futures (/NG): -2.39%
Euro futures (/6E): +0.13%
U.S. equity index futures are trading slightly lower on Wednesday after their resilient performance in the wake of the disappointing February U.S. inflation report yesterday.
U.S. Treasuries reversed overnight to trade weaker into the North American session, although the U.S. dollar remains weaker and precious metals have held gains (despite technical signs of topping). Energy is having the most interesting day, with the spread between crude oil and natural gas (long /CL + short /NG) widening out by over +5% thus far.
Symbol: Equities | Daily Change |
/ESH4 | +0.02% |
/NQH4 | -0.19% |
/RTYH4 | -0.09% |
/YMH4 | +0.09% |
Stocks drop
Stocks took a breather Wednesday morning after a green day on Tuesday that came despite hawkish rhetoric around Federal Reserve rate cut bets.
Despite this week’s inflation data, the chances of a June cut are holding around 62%, according to Fed funds futures. Tomorrow will bring one of the last data points on inflation ahead of the March 20 FOMC decision, with the February producer price index (PPI) expected to cross the wires at 0.3% from the month before.
Strategy: (48DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 17500 p Short 17700 p Short 19100 c Long 19300 c | 46% | +1785 | -2215 |
Short Strangle | Short 17700 p Short 19100 c | 60% | +7530 | x |
Short Put Vertical | Long 17500 p Short 17700 p | 75% | +815 | -3185 |
Symbol: Bonds | Daily Change |
/ZTM4 | -0.04% |
/ZFM4 | -0.10% |
/ZNM4 | -0.14% |
/ZBM4 | -0.31% |
/UBM4 | -0.51% |
Bonds move lower
Bonds continued to drift lower ahead of the market open on Wednesday morning, with 10-year T-note futures down 0.14%.
Today the Treasury will hold a reopening auction for 30-year bonds following yesterday’s 10-year reopening auction, which saw lukewarm demand.
Meanwhile, we are in a blackout period ahead of next week’s FOMC meeting on March 20, when the rate decision will come alongside updated economic projections, making it even more of a potential mover for the bond market.
Strategy (44DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 108.5 p Short 109 p Short 113 c Long 113.5 c | 58% | +156.25 | -343.75 |
Short Strangle | Short 109 p Short 113 c | 66% | +562.50 | x |
Short Put Vertical | Long 108.5 p Short 109 p | 87% | +78.13 | -421.88 |
Symbol: Metals | Daily Change |
/GCJ4 | +0.10% |
/SIK4 | +0.70% |
/HGK4 | +2.09% |
Copper rises
Copper futures are up over 2% after smelters in China agreed to join to cut production amid a shortage of copper concentrates. The rare agreement comes after a series of mine disruptions, including the Cobre mine owned by First Quantum (FM.TO).
Along with production cuts, some smelters will extend maintenance shutdowns to take advantage of the reduced production schedules. It’s unknown how long these production cuts will last for.
Strategy (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 3.85 p Short 3.9 p Short 4.1 c Long 4.15 c | 34% | +762.50 | -487.50 |
Short Strangle | Short 3.9 p Short 4.1 c | 57% | +3325 | x |
Short Put Vertical | Long 3.85 p Short 3.9 p | 69% | +412.50 | -837.50 |
Symbol: Energy | Daily Change |
/CLJ4 | +2.15% |
/HOJ4 | +2.93% |
/NGJ4 | -2.39% |
/RBJ4 | +2.06% |
Crude oil moves up
Crude oil futures (/CLJ4) rose after Tuesday’s report from the American Petroleum Institute (API) showed a 5.5-million-barrel drawdown in U.S. inventories.
The API also reported product draws for gasoline and diesel products, pointing to increased downstream demand for fuel products. Today we will see the Energy Information Administration (EIA) report its own numbers. Shifting weather forecasts pointing to a warmer spring season in the Northern parts of the U.S. may be weighing on natural gas prices (/NGJ4).
Strategy (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.45 p Short 1.5 p Short 2.1 c Long 2.15 c | 55% | +190 | -310 |
Short Strangle | Short 1.5 p Short 2.1 c | 67% | +1070 | x |
Short Put Vertical | Long 1.45 p Short 1.5 p | 74% | +110 | -390 |
Symbol: FX | Daily Change |
/6AH4 | +0.13% |
/6BH4 | +0.07% |
/6CH4 | +0.03% |
/6EH4 | +0.13% |
/6JH4 | -0.17% |
Global bond yields rise
Global bond yields moved higher overnight, including U.S. Treasury yields, weighing on the Japanese Yen (/6JH4).
But the U.S. dollar is lagging otherwise. Surging copper prices (/HGK4) have helped prop up the Australian Dollar (/6AH4). Traders have shrugged off weak U.K. GDP figures and a German 10-year bund auction, with both the British pound (/6BH4) and euro (/6EH4) posting very modest gains.
Strategy (51DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.075 p Short 1.08 p Short 1.12 c Long 1.125 c | 60% | +175 | -450 |
Short Strangle | Short 1.08 p Short 1.12 c | 66% | +525 | x |
Short Put Vertical | Long 1.075 p Short 1.08 p | 87% | +100 | -525 |
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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