Gold and Oil Soar as Israeli-Hamas Tensions Escalate
Gold and Oil Soar as Israeli-Hamas Tensions Escalate
Also, Nasdaq 100, ultra T-bond, silver and Japanese yen futures
This Morning’s Five Futures in Focus:
- Nasdaq 100 E-mini Futures (/NQ): -0.05%
- Ultra T-Bond Futures (/UB): +1.92%
- Silver Futures (/SI): +3.74%
- Crude Oil Futures (/CL): +4.56%
- Japanese Yen Futures (/6J): +0.19%
Earnings beats by JPMorgan (JPM), Wells Fargo (WFC) and Citigroup (C) have helped U.S. equity index futures regain some of their footing after a brutal second half of the day yesterday. But the biggest movers on the day come from the commodity space, where gold, silver and crude oil are posting impressive rallies amid rapidly escalating fears around an Israeli ground invasion of Gaza. Hamas declared today a global “Day of Jihad,” which will likely keep traders on edge through the end of the session.
Symbol: Equities | Daily Change |
/ESZ3 | +0.20% |
/NQZ3 | -0.05% |
/RTYZ3 | +0.29% |
/YMZ3 | +0.28% |
A slightly hotter than anticipated September U.S. inflation report and a terrible 30-year Treasury bond auction yesterday may have dragged down the major indices, but there’s been no such continuation lower today. Led higher by yesterday’s big loser, the Russell 2000 (/RTYZ3) is leading the modest rebound higher as the week comes to a close. Strong bank earnings may be helping to quell fears that the rise in yields in 3Q’23 were hampering banks’ balance sheets and squeezing U.S. consumers.
Strategy: (37DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 15000 p Short 15100 p Short 15700 c Long 15800 c | 61% | +2045 | -1955 |
Long Strangle | Long 15000 p Long 15800 c | 45% | x | -7780 |
Short Put Vertical | Long 15000 p Short 15100 p | 61% | +645 | -1355 |
Symbol: Bonds | Daily Change |
/ZTZ3 | +0.09% |
/ZFZ3 | +0.36% |
/ZNZ3 | +0.64% |
/ZBZ3 | +1.57% |
/UBZ3 | +1.92% |
The 30-year Treasury bond auction yesterday had a seismic impact on bond markets, but increasing tensions in the Israeli-Hamas conflict have helped curate a meaningful flight to safety at the end of the week. Once again, as so often in recent weeks, the long-end of the curve is doing the heavy lifting, with 30s (/ZBZ3) and ultras (/UBZ3) leading the turnaround higher. The 2s10s spread has dropped by -15-basis points, or bps, this week to -43 bps.
Strategy (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | x | x | x | x |
Long Strangle | x | x | x | x |
Short Put Vertical | x | x | x | x |
Symbol: Metals | Daily Change |
/GCZ3 | +2.26% |
/SIZ3 | +3.74% |
/HGZ3 | +0.03% |
Silver prices (/SIZ3) surged this morning, with traders placing a higher premium on geopolitical risks. Prices are up nearly 4%—the largest one-day percentage gain since August. The buying seen in the Treasury market, another safe-haven route for investors, is adding to the allure of precious metals, along with some weakness in the dollar.
Strategy (45DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 22.3 p Short 22.35 p Short 23.45 c Long 23.5 c | 20% | +200 | -60 |
Long Strangle | Long 22.3 p Long 23.5 c | 45% | x | -5,980 |
Short Put Vertical | Short 22.35 p Long 22.3 p | 58% | +120 | -135 |
Symbol: Energy | Daily Change |
/CLZ3 | +4.56% |
/NGZ3 | -1.73% |
Energy traders are on edge amid the escalations occurring in the Middle East as Israel appears to be gearing up for a major military operation in Gaza after a nearly week-long aerial campaign. The fear is Iran could be dragged into the war, which would affect global oil supply. /CLZ3 is trading about $4 per barrel higher this morning.
Strategy (33DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 80 p Short 80.5 p Short 86.5 c Long 87 c | 21% | +360 | -130 |
Long Strangle | Long 80 p Long 87 c | 46% | x | -5,890 |
Short Put Vertical | Short 80.5 p Long 80 p | 63% | +190 | -310 |
Symbol: FX | Daily Change |
/6AZ3 | +0.21% |
/6BZ3 | +0.16% |
/6CZ3 | +0.21% |
/6EZ3 | +0.12% |
/6JZ3 | +0.19% |
The Japanese yen is catching a safe haven bid this morning as tensions in the Middle East ratchet up. Prices (/6JZ3) are bouncing higher from a level defended earlier this month, which was also where many expected a possible intervention to occur that aligned with the 150 USD-JPY exchange rate. The drop in Treasury yields is helping to relieve some pressure on the Japanese currency, with traders moving on from this week’s U.S. inflation print.
Strategy (56DTE, 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 | 61% | +175 | -450 |
Long Strangle | Long 0.0065 p Long 0.007 c | 25% | x | -475 |
Short Put Vertical | Long 0.0065 p Short 0.00655 p | 87% | +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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