Nasdaq 100 Enthusiasm Falters After Trump Announces EU-US Trade Deal
Nasdaq 100 Enthusiasm Falters After Trump Announces EU-US Trade Deal
Also, 30-year T-bond, gold, crude oil and euro futures
- Nasdaq 100 E-mini futures (/NQ): +0.35%
- 30-year T-bond futures (/ZB): -0.14%
- Gold futures (/GC): -0.16%
- Crude oil futures (/CL): +1.83%
- Euro futures (/6E): -0.76%
News broke over the weekend that the European Union and the United States reached a trade agreement, announced by President Donald Trump and European Commission President Ursula von der Leyen in Scotland. High level, the US will impose 15% tariffs against the EU while 0% tariffs will be levied the other way. There are many details to figure out, and the minor issue that all 27 EU member states will need to ratify the agreement; a single country could derail the deal. Today, Sino-American talks with resume in Sweden, with Chinese state media reporting a 90-day pause will be announced on that front as well.
| Symbol: Equities | Daily Change |
| /ESU5 | +0.16% |
| /NQU5 | +0.35% |
| /RTYU5 | +0.37% |
| /YMU5 | 0% |
US equity markets greeted the news of trade deals and/or can kicking with mild enthusiasm, with each of the S&P 500 (/ESU5) and Nasdaq 100 (/NQU5) hitting fresh all-time highs overnight. But once European traders came online, weaker trading started to set in. While today and tomorrow are a bit on the quiet side, Wednesday through Friday promises a storm. Reports are scheduled in the second half of the week on gross domestic product and nonfarm payrolls. We’ll also hear from the Federal Open Market Committee. Plus earnings reports are coming fdue from Microsoft (MSFT), Meta (META), Apple (AAPL) and Amazon (AMZN)..
| Strategy: (53DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 21500 p Short 21750 p Short 25000 c Long 25250 c | 66% | +1125 | -3875 |
| Short Strangle | Short 21750 p Short 25000 c | 71% | +5185 | x |
| Short Put Vertical | Long 21500 p Short 21750 p | 86% | +415 | -4585 |
| Symbol: Bonds | Daily Change |
| /ZTU5 | -0.02% |
| /ZFU5 | -0.06% |
| /ZNU5 | -0.1% |
| /ZBU5 | -0.14% |
| /UBU5 | -0.3% |
Trump’s trade deals have done little to incentivize traders to push Treasuries higher, but somewhat similarly, downside action has been constrained as well. Volatility across the Treasury complex has been contracting in recent weeks, and the weekend’s news hasn’t done anything to change the environment materially. Rates markets are discounting a 98.1% chance of the Federal Reserve keeping rates on hold this week.
| Strategy (60DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 106 p Short 108 p Short 118 c Long 120 c | 63% | +500 | -1500 |
| Short Strangle | Short 108 p Short 118 c | 68% | +1203.13 | x |
| Short Put Vertical | Long 106 p Short 108 p | 86% | +265.63 | -1734.38 |
| Symbol: Metals | Daily Change |
| /GCZ5 | -0.16% |
| /SIU5 | -0.36% |
| /HGU5 | -0.17% |
Metals have generally enjoyed the ratcheting up of trade tensions and, conversely, have disliked when cooler heads have prevailed. The backdrop of negotiations and elimination of looming deadlines on Aug. 1 (world ex-China) and Aug. 12 (China) thusly takes some of the luster away from both gold (/GCZ5) and silver (/SIU5). Volatility has been crushed; declines in precious metals’ volatility over the past two years have been a contemporaneous indicator for weakness.
| Strategy (59DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 3150 p Short 3175 p Short 3600 c Long 3625 c | 67% | +690 | -1810 |
| Short Strangle | Short 3175 p Short 3600 c | 74% | +3780 | x |
| Short Put Vertical | Long 3150 p Short 3175 p | 83% | +400 | -2100 |
| Symbol: Energy | Daily Change |
| /CLU5 | +1.83% |
| /HOU5 | +1.66% |
| /NGU5 | 0% |
| /RBU5 | +1.65% |
Trade deal headlines aside, Trump’s announcement that he would be moving up Russia’s 50-day deadline sparked concern that the Russia-Ukraine war may be thrust into the spotlight, placing global energy supplies back in focus. Crude oil prices (/CLQ5) have already cleared last week’s high with the rally today.
| Strategy (51DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 57 p Short 59 p Short 74 c Long 76 c | 61% | +470 | -1530 |
| Short Strangle | Short 59 p Short 74 c | 68% | +1730 | x |
| Short Put Vertical | Long 57 p Short 59 p | 80% | +280 | -1720 |
| Symbol: FX | Daily Change |
| /6AU5 | -0.53% |
| /6BU5 | -0.05% |
| /6CU5 | -0.05% |
| /6EU5 | -0.76% |
| /6JU5 | -0.39% |
The biggest loser of the weekend’s news has been the euro (/6EU5) because the view is that the EU got the bad end of the deal (which is why ratification by all 27 states is so important). Similarly, the news is being interpreted as positive for clarification of the deal with Japan, which has evidently hit some snafus related to mutual understanding of some of the finer details announced last week.
| Strategy (39DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 1.14 p Short 1.145 p Short 1.195 c Long 1.2 c | 62% | +200 | -425 |
| Short Strangle | Short 1.145 p Short 1.195 c | 69% | +787.50 | x |
| Short Put Vertical | Long 1.14 p Short 1.145 p | 85% | +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
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