Nasdaq 100 Continues Breakout as Attention Turns to FOMC
Nasdaq 100 Continues Breakout as Attention Turns to FOMC
Also, 10-year T-note, silver, natural gas and Australian dollar futures
- Nasdaq 100 E-mini futures (/NQ): +0.5%
- 10-year T-note futures (/ZN): +0.26%
- Silver futures (/SI): +1.66%
- Natural gas futures (/NG): -2.11%
- Australian dollar futures (/6A): +1.25%
The risk-on rally that emerged in the wake of President-elect Donald Trump’s election victory has continued into today, with a slightly different tone: while U.S. equity markets are continuing to rally (with the Nasdaq 100 taking the pole position), there has been a sharp turn lower in both U.S. yields and the U.S. dollar. The one-two punch has helped revive metals, although energy markets remain pressured. The Federal Reserve will concluded its November policy meeting today; rates markets (Fed funds and three-month SOFR futures) are discounting a 99% chance of a 25-basis-point (bps) cut today.
Symbol: Equities | Daily Change |
/ESZ4 | +0.28% |
/NQZ4 | +0.5% |
/RTYZ4 | -0.07% |
/YMZ4 | +0.03% |
Nasdaq futures (/NQZ4) rose for a second day following U.S. election results, which pointed markets toward another era of deregulation and a Justice Department that will likely be less focused on antitrust measures. Qualcomm (QCOM) reported an earnings beat, which pushed its stock price up nearly 5% in pre-market trading. Arm (ARM) beat estimates as well, but the company offered light guidance, sending the stock down over 3% ahead of the bell.
Strategy: (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 19500 p Short 20000 p Short 22500 c Long 23000 c | 64% | +2060 | -7940 |
Short Strangle | Short 20000 p Short 22500 c | 69% | +4920 | x |
Short Put Vertical | Long 19500 p Short 20000 p | 81% | +1265 | -8735 |
Symbol: Bonds | Daily Change |
/ZTZ4 | +0.06% |
/ZFZ4 | +0.15% |
/ZNZ4 | +0.26% |
/ZBZ4 | +0.22% |
/UBZ4 | +0.33% |
Bonds traded higher across the curve, although the pace of gains appeared to weaken slightly overnight. Traders are bracing for today’s Federal Reserve interest rate announcement. Markets expect the Fed to cut by 25-bps. The terminal rate—the point at which the Fed stops cutting—trended higher since election night, suggesting the new administration’s policies could induce some inflation back into the economy.
Strategy (50DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 107 p Short 108 p Short 113 c Long 114 c | 65% | +250 | -750 |
Short Strangle | Short 108 p Short 113 c | 71% | +562.50 | x |
Short Put Vertical | Long 107 p Short 108 p | 85% | +156.25 | -843.75 |
Symbol: Metals | Daily Change |
/GCZ4 | +0.75% |
/SIZ4 | +1.66% |
/HGZ4 | +3.94% |
Silver prices retraced some of their losses on today, rising nearly 2% as a softer dollar cleared some upside for the metal. Weaker bond yields and mostly positive trade data out of China also helped to bolster sentiment following the election sell-off.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 28 p Short 29 p Short 36 c Long 37 c | 68% | +1155 | -3845 |
Short Strangle | Short 29 p Short 36 c | 73% | +3255 | x |
Short Put Vertical | Long 28 p Short 29 p | 83% | +580 | -4420 |
Symbol: Energy | Daily Change |
/CLZ4 | -0.57% |
/HOZ4 | -1.04% |
/NGZ4 | -2.11% |
/RBZ4 | -0.53% |
Natural gas prices remain weak as traders prepare for Hurricane Rafael to move through the Gulf of Mexico (GoM). Currently, about 7% of gas production in the GoM is shut-in, according to the Bureau of Safety and Environmental Enforcement (BSEE). The storm will also likely disrupt shipping channels, leading to a backlog of tankers exporting product from terminals across Texas and the Louisiana coasts.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 2 p Short 2.1 p Short 3.4 c Long 3.5 c | 67% | +250 | -750 |
Short Strangle | Short 2.1 p Short 3.4 c | 75% | +1570 | x |
Short Put Vertical | Long 2 p Short 2.1 p | 90% | +70 | -930 |
Symbol: FX | Daily Change |
/6AZ4 | +1.25% |
/6BZ4 | +0.68% |
/6CZ4 | +0.44% |
/6EZ4 | +0.55% |
/6JZ4 | +0.61% |
Australian dollar futures (/6AZ4) benefited from the upbeat trade data out of China, rising with the risk-on tone seen in Asian equity markets overnight. The currency hit a two-week high as broader dollar strength eased overnight following the post-election surge. China is set for a heavy week of economic data as well as a possible announcement on stimulus plans, which could push prices higher.
Strategy (57DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 0.655 p Short 0.66 p Short 0.675 c Long 0.68 c | 30% | +330 | -170 |
Short Strangle | Short 0.66 p Short 0.675 c | 53% | +1270 | x |
Short Put Vertical | Long 0.655 p Short 0.66 p | 70% | +150 | -350 |
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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