Five Futures

S&P 500, Nasdaq, Gold, Crude Oil and Yen Futures

By:Christopher Vecchio, CFA

This Morning’s Five Futures in Focus

Fig. 1: Intraday price percent change chart for /ES, /ZN, /GC, /CL, /6J
Fig. 1: Intraday price percent change chart for /ES, /ZN, /GC, /CL, /6J

  1. S&P 500 E-mini futures (/ES): +0.96%
  2. 10-year T-Note futures (/ZN): -0.31%
  3. Gold futures (/GC): -0.36%
  4. Crude oil futures (/CL): -0.23%
  5. Japanese yen futures (/6J): -0.09%

Following the abrupt turnaround in asset prices on Thursday—be it for exhaustion post-Nvidia (NVDA) earnings or pre-Jackson Hole positioning reasons—there is some semblance of stability across asset classes heading into the U.S. trading session. All eyes will be on Fed chair Jerome Powell’s speech starting at 10:05 Eastern Time/9:05 Central Time. Read the Jackson Hole preview before things get underway.

Symbol: Equities

Daily Change

/ESU3

+0.40%

/NQU3

+0.30%

/RTYU3

+0.63%

/YMU3

+0.45%

What Nvidia giveth, it also taketh away. At least that was the mantra on Thursday. Fortunately for equity market bulls, the sell-off did not accelerate overnight. Instead, each of the four major U.S. equity index futures are trading modestly higher. For the S&P 500 (/ESU3), the 0DTE options are pricing in less than a +/-1% move by the end of the session, which puts today’s speech by Powell in the same territory (in terms of the likely impact on markets) not far removed from what markets have discounted around U.S. CPI releases thus far in 2023.

Strategy: (0DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 4390 p

Short 4395 p

Short 4405 c

Long 4410 c

3%

+190

-60

Long Strangle

Long 4395 p

Long 4405 c

95%

x

-437.50

Short Put Vertical

Long 4390 p

Short 4395 p

55%

+170

-80

/ESU3

Symbol: Bonds

Daily Change

/ZTU3

-0.02%

/ZFU3

-0.06%

/ZNU3

-0.06%

/ZBU3

-0.08%

/UBU3

0.00%

U.S. Treasury yields jumped higher on Thursday and the selloff in bonds has continued thus far on Friday. The impetus: stronger U.S. durable goods orders for July revitalized concern that an accelerating U.S. economy could provoke the Fed into a more hawkish stance. Rate hike odds for September have been pulled forward, and now the odds markets see are just better than a 50/50 chance of a 25-bps rate hike in November. Similarly, the timing of the first-rate cut has been pushed back from March 2024 to June 2024, according to the /SR3 contracts.

Strategy (0DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 109 p

Short 109.25 p

Short 109.75 c

Long 110 c

46%

+125

-125

Long Strangle

Long 109.25 p

Long 109.75 c

43%

x

-234.38

Short Put Vertical

Long 109 p

Short 109.25 p

72%

+62.50

-187.50

/ZNU3

Symbol: Metals

Daily Change

/GCV3

-0.08%

/SIU3

+0.06%

/HGU3

+0.38%

Gold prices (/GCV3) are little changed this morning, while silver (/SIU3) is up about 0.25% even as bond yields inch slightly higher. The two- and five-year yields, which are more sensitive to policy implications, will likely dictate precious metal prices through the day as markets prepare for Powell’s speech at the Jackson Hole Economic Symposium. The rolling one-month correlation between /GCV3 and the five-year note (/ZFU3) is currently +0.73, suggesting that trading precious metals or bonds is effectively the same trade.

Strategy (0DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 1915 p

Short 1920 p

Short 1930 c

Long 1935 c

42%

+280

-220

Long Strangle

Long 1920 p

Long 1930 c

44%

x

-590

Short Put Vertical

Long 1915 p

Short 1920 p

73%

+100

-400

/GCV3

Symbol: Energy

Daily Change

/CLV3

+1.18%

/NGU3

-0.87%

Crude oil prices (/CLU3) are up about 1% this morning, although the commodity is on track to record a second weekly loss. Early estimates from various energy firms are showing a decline in crude oil exports, which suggests that inventory figures due next week may support further selling. Energy traders also have their eyes on rig count figures due today from Baker Hughes. And, of course, Jerome Powell’s upcoming comments are another key factor to consider.

Strategy (0DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 79.75 p

Short 80 p

Short 80.5 c

Long 80.75 c

26%

+180

-70

Long Strangle

Long 80 p

Long 80.5 c

50%

x

-620

Short Put Vertical

Long 79.75 p

Short 80 p

57%

+90

-160

/CLV3

Symbol: FX

Daily Change

/6AU3

+0.09%

/6BU3

+0.07%

/6CU3

-0.07%

/6EU3

+0.04%

/6JU3

-0.07%

The U.S. dollar’s surge on Thursday has been met by a more tempered response on Friday, though that’s not much of a surprise given the reversal of sorts seen across most asset classes ahead of Powell’s speech. Today’s outlook for the U.S. dollar is simple: if U.S. Treasury yields go up, the dollar is likely to as well. And while traders may be tempted to use the Japanese yen (/6JU3) as their preferred trading vehicle given how sensitive it has been to interest rate differentials, it makes sense that a yen intervention looms large.

Strategy (14DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor

Long 0.006825 p

Short 0.00685 p

Short 0.0069 c

Long 0.006925 c

27%

+225

-87.50

Long Strangle

Long 0.006825 p

Long 0.0069 c

45%

x

-875

Short Put Vertical

Long 0.006825 p

Short 0.00685 p

65%

+112.50

-187.50

/6JU3

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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

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