Nasdaq 100, Russell 2000 Lead Lower as Yields Push High
Nasdaq 100, Russell 2000 Lead Lower as Yields Push High
Also, 10-year T-notes, gold, crude oil and Japanese yen futures
- Russell 2000 E-mini Futures (/RTY): -0.79%
- 10-year T-Note Futures (/ZN): -0.01%
- Gold Futures (/GC): +1.32%
- Crude Oil Futures (/CL): +1.45%
- Japanese Yen Futures (/6J): +0.01%
The fog of war has weighed heavy on markets over the past 24 hours amid conflicting reports over who is responsible for an explosion at a hospital in Gaza. Geopolitical war hedging is back in vogue mid-week, with the U.S. dollar and Japanese yen outperforming their counterparts amid a rise in crude oil and gold prices.. U.S. housing data came in weaker, while earnings from a slew of companies (Morgan Stanley (MS), Proctor & Gamble (PG) and United Airlines (UAL)) were decidedly mixed at best.
Symbol: Equities | Daily Change |
/ESZ3 | -0.53% |
/NQZ3 | -0.72% |
/RTYZ3 | -0.79% |
/YMZ3 | -0.27% |
Similar to yesterday, all four major stock indexes are trading lower ahead of the U.S. cash equity session today. The Nasdaq 100 (/NQZ3) and the Russell 2000 (/RTYZ3) are losing the most ground as long-end U.S. Treasury yields have crept higher this week. Riots in the Arab world threaten to broaden the conflict beyond Israel-Hamas, weighing on sentiment overnight. Meanwhile, Tesla (TSLA) and Netflix (NFLX) earnings after the bell will be widely watched as gauges for tech earnings—mainly, the Magnificent Seven—over the coming weeks.
Strategy: (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1675 p Short 1700 p Short 1850 c Long 1850 c | 46% | +515 | -735 |
Long Strangle | Long 1675 p Long 1850 c | 36% | x | -1420 |
Short Put Vertical | Long 1675 p Short 1700 p | 72% | +270 | -980 |
Symbol: Bonds | Daily Change |
/ZTZ3 | +0.02% |
/ZFZ3 | +0.02% |
/ZNZ3 | -0.01% |
/ZBZ3 | -0.26% |
/UBZ3 | -0.30% |
The carnage in the bond market yesterday has found little reprieve today, although that damage has been contained at the short-end and the belly of the yield curve. In a familiar refrain, it’s the long-end that’s provoking the most indigestion for traders: 30s (/ZBZ3) and ultras (/UBZ3) are the biggest losers again.
Strategy (37DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 104 p Short 104.5 p Short 107.5 c Long 108 c | 42% | +250 | -250 |
Long Strangle | Long 104 p Long 108 c | 37% | x | -828.13 |
Short Put Vertical | Long 104 p Short 104.5 p | 77% | +125 | -375 |
Symbol: Metals | Daily Change |
/GCZ3 | +1.32% |
/SIZ3 | +1.37% |
/HGZ3 | +0.52% |
Geopolitical tensions continue fueling upside in precious metals, with gold prices (/GCZ3) rising to a five-week high this morning. While that leaves the metal susceptible to a pullback on some profit taking, safe-haven demand should support the bid if prices pull back, with traders seeing it as a potential opportunity to buy the metal. Prices weren’t impacted by U.S. housing data this morning.
Strategy (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1930 p Short 1940 p Short 1980 c Long 1990 c | 56% | +560 | -440 |
Long Strangle | Long 1930 p Long 1990 c | 46% | x | -5180 |
Short Put Vertical | Long 1930 p Short 1940 p | 62% | +450 | -550 |
Symbol: Energy | Daily Change |
/CLZ3 | +1.45% |
/NGZ3 | +1.53% |
Oil prices (/CLZ3) rose this morning as fears of a broadening conflict in the Middle East spread after yesterday’s explosion at a hospital in Gaza led Israel and Hamas to trade blame for the incident. Iran called for an oil embargo against Israel over the incident, with Iran’s foreign minister, Hossein Amirabdollahian, reportedly pushing for the action. Bloomberg cited a ministry statement on Telegram as evidence of Iran's intent. Meanwhile, the Energy Information Admiration’s inventory data is due today after a private report yesterday showed declining crude stocks.
Strategy (28DTE, ATM) | Strikes | POP | Max Profit | Max Loss | |
Iron Condor | Long 83.5 p Short 84 p Short 89.5 c Long 90 c | 58% | +600 | -410 | |
Long Strangle | Long 83.5 p Long 90 c | 46% | x | -5280 | |
Short Put Vertical | Long 83.5 p Short 84 p | 58% | +210 | -290 |
Symbol: FX | Daily Change |
/6AZ3 | +0.05% |
/6BZ3 | 0.00% |
/6CZ3 | -0.11% |
/6EZ3 | -0.14% |
/6JZ3 | +0.01% |
The Japanese yen (/6JZ3) was unchanged this morning as investors seek liquid safe havens, as well as a surprise bond buying operation conducted overnight by the Bank of Japan. But the currency is sitting near intervention levels, which could artificially protect further downside. Traders continue to debate over the yen's direction, with the Bank of Japan’s exit path from ultra loose policy weighing against U.S. economic concerns. Still, the U.S. 10-year yield is offering over 400 basis points (bps) of premium vs. its comparative Japanese instrument, which should keep pressure on the yen, for now.
Strategy (51DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 0.0065 p Short 0.00655 p Short 0.00695 c Long 0.007 c | 67% | +150 | -475 |
Long Strangle | Long 0.0065 p Long 0.007 c | 21% | x | -325 |
Short Put Vertical | Long 0.0065 p Short 0.00655 p | 88% | +75 | -550 |
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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