five futures to watch

Nasdaq 100 Goes Lower and S&P 500 Higher as U.S. Treasury Yields Twist

By:Christopher Vecchio, CFA

Also, five -year T-notes, silver, crude oil and Japanese yen futures

nasdaq, treasuries, silver, crude, yen

  1. Nasdaq 100 E-mini futures (/NQ): -0.02%
  2. Five-year T-note futures (/ZF): -0.04% 
  3. Silver futures (/SI): -1.07%
  4. Crude oil (/CL): +0.49%
  5. Japanese yen futures (/6J): -1.34%

The markets remain on edge over the evolving situation in the Middle East while a mixed earning season leaves equity traders wanting more. However, a drop in Treasury yields from an updated outlook on borrowing from the U.S. Treasury Department is helping to take some weight off of stocks. Meanwhile, equity markets are digesting the latest move from the Bank of Japan (BoJ) as traders await further policy decisions with the Federal Reserve in focus. Crude oil is advancing after Israel conducted airstrikes in Syria overnight.

Symbol: Equities

Daily Change

/ESZ3

+0.13%

/NQZ3

-0.02%

/RTYZ3

+0.34%

/YMZ3

-0.01%

U.S. equity indexes are swinging between losses and gains this morning as traders mull falling Treasury yields. It’s happening amid a still-volatile risk environment as earnings season continues with mixed results. Investors are watching earnings from Advanced Micro Devices (AMD) due today after market close to assess the technology sector further, which will likely have an outsized impact on the Nasdaq-100, which is nearly unchanged this morning (/NQZ3). 

Strategy: (44DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor 

Long 14100 p

Short 14200 p

Short 14900 c

Long 15000 c

39%

+1455

-545

Long Strangle

Long 14100 p

Long 15000 c

23%

x

-10790

Short Put Vertical

Long 14100 p

Short 14200 p

74%

+590

-1410

nasdaq

Symbol: Bonds

Daily Change

/ZTZ3

-0.05%

/ZFZ3

-0.04%

/ZNZ3

+0.06%

/ZBZ3

+0.49%

/UBZ3

+0.72%

The bond market is reacting to a recent announcement by the U.S. Treasury Department that the amount of borrowing will decrease for the October to December quarter from $852 billion to $776 billion as revenue estimates strengthen. That is pressuring yields across the middle and long-end of the curve, although the short end, and the five-year notes seem less effected. /ZFZ3 is down about 0.01% this morning.

Strategy (52DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor 

Long 104 p

Short 104.25 p

Short 105.75 c

Long 106 c

30%

+171.88

-78.13

Long Strangle

Long 104 p

Long 106 c

43%

x

-929.69

Short Put Vertical

Long 104 p

Short 104.25 p

74%

+101.56

-148.44

five-year notes

Symbol: Metals

Daily Change

/GCZ3

-0.03%

/SIZ3

-1.07%

/HGZ3

-0.33%

The technical outlook for silver prices (/SIZ3) has degraded over the past several weeks, with the metal making a series of lower lows. Following the latest rally from early October, prices have had trouble capturing the 23.5 level. This morning, prices are down 0.27, or 1.16%, despite lower Treasury yields. 

Strategy (56DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor 

Long 22.9 p

Short 23 p

Short 23.3 c

Long 23.4 c

10%

+450

-50

Long Strangle

Long 22.9 p

Long 23.4 c

46%

x

-5540

Short Put Vertical

Long 22.9 p

Short 23 p

56%

+235

-265

silver

Symbol: Energy

Daily Change

/CLZ3

+0.49%

/NGZ3

+2.18%

Crude oil prices (/CLZ3) moderated Tuesday morning after prices sank to start the week. Energy traders are buying the commodity as Israel advances through parts of Gaza while conducting surgical air strikes in Syria against Iranian-backed militia targets. Traders have their eyes on U.S. inventory figures due today from the American Petroleum Institute (API).

Strategy (44DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor 

Long 79 p

Short 79.5 p

Short 84.5 c

Long 85 c

18%

+380

-120

Long Strangle

Long 79 p

Long 85 c

48%

x

-6120

Short Put Vertical

Long 79 p

Short 79.5 p

58%

+210

-290

crude oil

Symbol: FX

Daily Change

/6AZ3

-0.50%

/6BZ3

-0.04%

/6CZ3

-0.22%

/6EZ3

+0.06%

/6JZ3

-1.34%

The Japanese yen (/6JZ3) fell after the Bank of Japan tweaked its policy on yield curve control to target 0% for its 10-year bond (JGB), although it will keep 1% as a reference rate. That disappointed hawkish expectations and signaled that the BoJ is comfortable with the currency depreciation it has seen so far. For now, however, weaker Treasury yields are helping to stem further losses in the Japanese currency.

Strategy (38DTE, ATM)

Strikes

POP

Max Profit

Max Loss

Iron Condor 

Long 0.0065 p

Short 0.00655 p

Short 0.00685 c

Long 0.0069 c

59%

+200

-425

Long Strangle

Long 0.0065 p

Long 0.0069 c

25%

x

-425

Short Put Vertical

Long 0.0065 p

Short 0.00655 p

80%

+112.50

-512.50

japanese yen

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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