Nasdaq 100 Goes Lower and S&P 500 Higher as U.S. Treasury Yields Twist
Nasdaq 100 Goes Lower and S&P 500 Higher as U.S. Treasury Yields Twist
Also, five -year T-notes, silver, crude oil and Japanese yen futures
- Nasdaq 100 E-mini futures (/NQ): -0.02%
- Five-year T-note futures (/ZF): -0.04%
- Silver futures (/SI): -1.07%
- Crude oil (/CL): +0.49%
- 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 |
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 |
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 |
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 |
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 |
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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