Russell 2000 Leads Lower as Meme Stocks Sag
The deluge of macro events has barely begun this week, keeping traders focused on the latest surge in meme stocks following Keith Gill’s Reddit post over the weekend (seriously!). Meme stocks are indeed leading the way lower today, with an equal-weighted basket of the top 10 most shorted stocks in the Russell 2000 (/RTYM4) down by 2.22% pre-market (compared to the 0.87% drop in /RTYM4). Amid the continued drop in commodity prices, U.S. Treasuries are continuing to rally; there are no meaningful Treasury auctions this week.
Symbol: Equities | Daily Change |
/ESM4 | -0.38% |
/NQM4 | -0.29% |
/RTYM4 | -0.87% |
/YMM4 | -0.31% |
Small-cap equities are leading the U.S. market lower as the gains in the bond market slow this morning after rising sharply following data that showed factory activity in the United States slowed further in May. Traders have U.S. job openings and labor turnover survey (JOLTS) data on the radar for today ahead of this week’s non-farm payrolls report, which will be the biggest influencer on Federal Reserve interest rate cut bets. Russell 2000 contracts (/RTYM4) were down 0.93% this morning ahead of the New York opening bell.
Strategy: (45DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1925 p Short 1950 p Short 2200 c Long 2225 c | 62% | +335 | -915 |
Short Strangle | Short 1950 p Short 2200 c | 68% | +1305 | x |
Short Put Vertical | Long 1925 p Short 1950 p | 82% | +195 | -1055 |
Symbol: Bonds | Daily Change |
/ZTU4 | +0.05% |
/ZFU4 | +0.15% |
/ZNU4 | +0.21% |
/ZBU4 | +0.43% |
/UBU4 | +0.48% |
The 30-year T-Bond contracts (/ZBU4) continued to rise this morning, up 0.43%, with prices approaching the May swing high, which may prove to be a decisive point for bond traders. A slew of labor market data is due this week, which will likely be a make-or-break moment for bonds, which have rallied over the past week. This morning’s JOLTS data will likely set the tone for bonds traders for the rest of the trading day. No auctions are scheduled for the Treasury.
Strategy (52DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 113 p Short 114 p Short 123 c Long 124 c | 62% | +312.50 | -687.50 |
Short Strangle | Short 114 p Short 123 c | 70% | +1187.50 | x |
Short Put Vertical | Long 113 p Short 114 p | 83% | +171.88 | -828.13 |
Symbol: Metals | Daily Change |
/GCQ4 | -0.70% |
/SIN4 | -2.35% |
/HGN4 | -2.36% |
Silver prices (/SIN4) traded to the lowest levels since mid-May this morning as the U.S. dollar rebounded from two-month lows. The metal was as low as 10% from its recent highs but the pullback may provide an opportunity for speculators to get back into the long side of the trade. Data from the Commodity Futures Trading Commission (CFTC) showed that longs remained the most bullish since early 2020, although shorts added to their positions too, according to Friday’s data.
Strategy (51DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 27 p Short 27.25 p Short 33.75 c Long 34 c | 62% | +375 | -875 |
Short Strangle | Short 27.25 p Short 33.75 c | 71% | +3890 | x |
Short Put Vertical | Long 27 p Short 27.25 p | 81% | +195 | -1055 |
Symbol: Energy | Daily Change |
/CLN4 | -1.43% |
/HON4 | -1.02% |
/NGN4 | +0.44% |
/RBN4 | -0.92% |
Energy markets are still reeling from the surprise announcement over the weekend from OPEC+ that the 2.2 million-barrels-per-day (bpd) production cut would wind down starting in October. Concerns about increased supply at a time when the global economy, particularly in the U.S., appears to be slowing down, have seen crude oil prices (/CLN4) drop over 5% this week. The weekly U.S. API crude oil stock change is due later today.
Strategy (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 65 p Short 65.5 p Short 79.5 c Long 80 c | 63% | +140 | -360 |
Short Strangle | Short 65.5 p Short 79.5 c | 70% | +1300 | x |
Short Put Vertical | Long 65 p Short 65.5 p | 84% | +70 | -430 |
Symbol: FX | Daily Change |
/6AM4 | -0.45% |
/6BM4 | -0.23% |
/6CM4 | -0.23% |
/6EM4 | -0.28% |
/6JM4 | +0.82% |
Wash, rinse, repeat: Weaker energy prices and lower bond yields are proving to be a formidable tailwind for the Japanese yen (/6JM4) for the second day in a row, making it the only major currency to post a gain vs. the U.S. dollar today. There is a distinct risk-off tone to FX markets, even with the Bank of Canada and European Central Bank rate decisions looming over the next 48 hours.
Strategy (31DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 0.00635 p Short 0.0064 p Short 0.0067 c Long 0.00675 c | 60% | +187.50 | -437.50 |
Short Strangle | Short 0.0064 p Short 0.0067 c | 67% | +550 | x |
Short Put Vertical | Long 0.00635 p Short 0.0064 p | 84% | +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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