Nasdaq 100 Dips as Yields Jump Following Release of Retail Sales Data
While markets were in a geopolitical war hedge mode between Friday and Monday—laying on the hedges, then taking them off—news that President Joe Biden would travel to Israel tomorrow has markets returning to conditions seen in recent months. That is, instead of bonds and stocks trading in different directions, we now see that U.S. equity markets are being weighed on by the recent push higher in bond yields. A better-than-expected U.S. retail sales report for September is rekindling concerns the Federal Reserve might need to raise interest rates again this year (however marginally).
Symbol: Equities | Daily Change |
/ESZ3 | -0.46% |
/NQZ3 | -0.69% |
/RTYZ3 | -0.48% |
/YMZ3 | -0.21% |
After a resurgent session yesterday—the S&P 500’s (/ESZ3) 15th consecutive gain on a Monday, a new record—all four major stock indexes were trading in the red ahead of the U.S. cash equity session today. The Nasdaq 100 (/NQZ3) and the Russell 2000 (/RTYZ3) are proving the most sensitive to the bump higher in yields despite what has thus far been a positive round of earnings releases, particularly from the big banks.
Strategy: (44DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 14700 p Short 14800 p Short 15600 c Long 15700 c | 60% | +2150 | -1850 |
Long Strangle | Long 14700 p Long 15700 c | 68% | x | -11065 |
Short Put Vertical | Long 14700 p Long 15700 p | 56% | +575 | -1425 |
Symbol: Bonds | Daily Change |
/ZTZ3 | -0.12% |
/ZFZ3 | -0.34% |
/ZNZ3 | -0.52% |
/ZBZ3 | -0.90% |
/UBZ3 | -1.03% |
Now that a small window has opened for the Israel-Hamas war to deescalate with President Biden’s trip tomorrow, markets are moving away from their geopolitical war hedge stance (bonds up/stocks down, and vice versa) back to focus around higher for longer (bonds down/stocks down). The long-end of the curve remains the focal point, with 30s (/ZBZ3) and ultras (/UBZ3) once again proving to be the biggest movers.
Strategy (38DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 103 p Short 103.25 p Short 105.75 c Long 106 c | 48% | +101.56 | -148.44 |
Long Strangle | Long 103 p Long 106 c | 35% | x | -437.50 |
Short Put Vertical | Long 103 p Short 103.25 p | 83% | +54.69 | -195.31 |
Symbol: Metals | Daily Change |
/GCZ3 | +0.25% |
/SIZ3 | +0.37% |
/HGZ3 | -1.17% |
Despite a rise in U.S. Treasury yields and a bounce higher by the U.S. dollar, precious metals are faring well, clawing back their minor losses from yesterday. Silver (/SIZ3) is leading the way higher, although gold prices (/GCZ3) aren’t far behind. Meanwhile, swirling concerns around the Chinese property section continue to weigh on copper prices (/HGZ3), which hit fresh 2023 lows earlier today.
Strategy (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 22.5 p Short 22.6 p Short 23.1 c Long 23.2 c | 53% | +345 | -155 |
Long Strangle | Long 22.5 p Long 23.2 c | 47% | x | -6205 |
Short Put Vertical | Long 22.5 p Short 22.6 p | 56% | +240 | -260 |
Symbol: Energy | Daily Change |
/CLZ3 | +0.11% |
/NGZ3 | -0.23% |
Yesterday’s news that the U.S. might lift sanctions against Venezuelan oil production helped spark a move lower in energy markets, as did the unwinding of the hedges put into place at the end of last week. The prospect of increased supply coming back into the market could help rebalance the supply/demand deficit in crude oil (/CLZ3) in place thanks to OPEC+’s 3 million basis-point (bps) deficit through the end of the quarter. The American Petroleum Institute (API) will release its crude oil stock change report today for the week ended Oct. 13.
Strategy (30DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 83.5 p Short 84 p Short 89.5 c Long 90 c | 21% | +370 | -130 |
Long Strangle | Long 83.5 p Long 90 c | 47% | x | -5110 |
Short Put Vertical | Long 83.5 p Short 84 p | 54% | +240 | -260 |
Symbol: FX | Daily Change |
/6AZ3 | +0.07% |
/6BZ3 | -0.50% |
/6CZ3 | -0.53% |
/6EZ3 | -0.04% |
/6JZ3 | -0.13% |
Weaker than expected wage growth in the United Kingdom for August and a softer than anticipated Canada inflation report for September have both the British pound (/6BZ3) and Canadian dollar (/6CZ3) reeling today. Coupled with the rise in U.S. Treasury yields on the heels of the September U.S. retail sales report, the tailwinds are at the U.S. dollar’s back as markets turn into the middle of the week.
Strategy (52DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.19 p Short 1.195 p Short 1.235 c Long 1.24 c | 42% | +168.75 | -143.75 |
Long Strangle | Long 1.19 p Long 1.24 c | 37% | x | -743.75 |
Short Put Vertical | Long 1.19 p Short 1.195 p | 77% | +81.25 | -231.25 |
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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