Nasdaq 100 Futures Decline amid Oil Rally Impact on Bonds

Nasdaq 100 Futures Decline amid Oil Rally Impact on Bonds

Also five-year T-note, silver, crude oil and Australian dollar futures

  1. Nasdaq 100 E-mini futures (/NQ): -0.54% 

  2. Five-year T-Note futures (/ZF): -0.15% 

  3. Silver futures (/SI): +2.54% 

  4. Crude oil futures (/CL): +1.51% 

  5. Australian dollar futures (/6A): +0.32% 

The continued surge in commodity prices may be having a ripple effect through inflation expectations and into the bond market. A push to fresh yearly highs in crude oil and gold prices is difficult to ignore, with both U.S. Treasury 10- and 30-year yields now at fresh yearly highs as well. U.S. equity markets may be starting to take notice, with losses accumulating overnight. The U.S. dollar is stepping back today after hitting a fresh yearly high yesterday, too. 

Symbol: Equities 

Daily Change 

/ESM4 

-0.46% 

/NQM4 

-0.54% 

/RTYM4 

-0.93% 

/YMM4 

-0.61% 

Equity markets remain under pressure as traders weigh the ongoing bond selloff against a resilient U.S. economy. The chances for three Federal Reserve rate cuts slipped away, and now the timing of a June cut is less than certain, according to Fed funds futures. The tech-heavy Nasdaq (/NQM4) is down 0.77% this morning and other indexes, including the small-cap Russell, are also down. That highlights a broader selloff indicating more fear in the market than usual. Healthcare stocks are some of the biggest losers this morning after the government failed to raise rates for Medicare payments.  

Strategy: (45DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 17000 p 

Short 17250 p 

Short 19250 c 

Long 19500 c 

62% 

+1465 

-3535 

Short Strangle 

Short 17250 p 

Short 19250 c 

69% 

+4815 

Short Put Vertical 

Long 17000 p 

Short 17250 p 

85% 

+650 

-4350 

/NQM4

Symbol: Bonds 

Daily Change 

/ZTM4 

-0.01% 

/ZFM4 

-0.15% 

/ZNM4 

-0.33% 

/ZBM4 

-0.84% 

/UBM4 

-0.87% 

Treasuries continue to sell off from yesterday when a stronger-than-expected manufacturing report for the U.S. put more pressure on Fed rate cut bets. The bond market pressure extended overseas, pushing yields higher in Europe as well. The five-year T-note futures (/ZFM4) fell 0.15% ahead of the New York open. There are no Treasury auctions today, but several Federal Reserve officials are set to speak today, which could see interest rate cut bets swing further. Tomorrow’s Institute of Supply Management (ISM) services index and a speech from Fed Chair Jerome Powell is in focus for bond traders. 

Strategy (52DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 104.25 p 

Short 104.5 p 

Short 108 c 

Long 108.25 c  

61% 

+70.31 

-179.69 

Short Strangle 

Short 104.5 p 

Short 108 c 

68% 

+335.94 

Short Put Vertical 

Long 104.25 p 

Short 104.5 p 

92% 

+31.25 

-218.75 

/ZFM4

Symbol: Metals 

Daily Change 

/GCM4 

+0.83% 

/SIK4 

+2.54% 

/HGK4 

+0.80% 

Precious metals are acting as a haven amid today’s equity and bond market behavior, with gold and silver prices both higher this morning. Silver futures (/SIK4) are up 2.54%, putting the metal up against its March swing high. A strong economic backdrop, underpinned by yesterday’s U.S. manufacturing report, is helping push the metal higher because of its dual use as an industrial metal.  

Strategy (56DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 24 p 

Short 24.5 p 

Short 28.5 c 

Long 29 c 

54% 

+955 

-1545 

Short Strangle 

Short 24.5 p 

Short 28.5 c 

65% 

+3960 

Short Put Vertical 

Long 24 p 

Short 24.5 p 

72% 

+650 

-1850 

/SIK4

Symbol: Energy 

Daily Change 

/CLK4 

+1.51% 

/HOK4 

+1.76% 

/NGK4 

-2.67% 

/RBK4 

+0.90% 

Geopolitical risks are making a tangible impact on energy markets after Ukraine launched another successful drone attack on a Russian oil refinery. Russia initially denied the drone attack succeeded but a Reuters analysis showed the facility’s main refining unit was damaged, potentially taking off as much capacity as 340,000 barrels per day (bpd). The attack comes after tensions in the Middle East escalated because Israel eliminated several high value Iranian military commanders. The American Petroleum Institute (API) will report crude inventory and products data today.

Strategy (44DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 76 p 

Short 76.5 p 

Short 91.5 c 

Long 92 c 

65% 

+130 

-370 

Short Strangle 

Short 76.5 p 

Short 91.5 c 

73% 

+1400 

Short Put Vertical 

Long 76 p 

Short 76.5 p 

84% 

+70 

-430 

/CLK4

Symbol: FX 

Daily Change 

/6AM4 

+0.32% 

/6BM4 

+0.18% 

/6CM4 

+0.14% 

/6EM4 

+0.11% 

/6JM4 

-0.01% 

The Australian dollar (/6AM4) gained overnight and is 0.32% higher ahead of the NY opening bell despite rising Treasury yields and a risk-off tone across equity markets. Minutes from the Reserve Bank of Australia’s latest meeting showed evidence that the board will remain in a neutral stance for now, dashing rate hike bets and offering a path for its economy to stabilize following a period of stiff inflation. That comes amid a backdrop of improving relations with China, one of Australia’s largest trading partners. Last week, China lifted anti-dumping tariffs on Australian wine, offering relief to the country’s sprawling wine market.  

Strategy (45DTE, ATM) 

Strikes 

POP 

Max Profit 

Max Loss 

Iron Condor  

Long 0.635 p 

Short 0.64 p 

Short 0.675 c 

Long 0.68 c 

73% 

+120 

-380 

Short Strangle 

Short 0.64 p 

Short 0.675 c 

77% 

+290 

Short Put Vertical 

Long 0.635 p 

Short 0.64 p 

83% 

+90 

-410 

/6AM4

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.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.

Source Reference

Latest stories