Also, two-year T-note, gold, crude oil and euro futures
S&P 500 E-mini futures (/ES): +0.26%
Two-year T-note futures (/ZT): +0.05%
Gold futures (/GC): -0.88%
Crude oil futures (/CL): +0.70%
Euro futures (/6E): +0.24%
Another relatively quiet week beckons, save for one major data release: the April U.S. consumer price index (CPI) report due Wednesday. Ahead of the benchmark inflation report, markets are treading water with both U.S. equity and bond markets posting modest gains this morning. A weaker U.S. dollar—even against the Japanese yen—coupled with lower yields may be helping to prop up commodities this morning (save gold prices).
Symbol: Equities | Daily Change |
/ESM4 | +0.26% |
/NQM4 | +0.38% |
/RTYM4 | +0.74% |
/YMM4 | +0.19% |
Each of the four major U.S. equity index futures are pointing higher today, led by the Russell 2000 (/RTYM4). That’s not to say the S&P 500 (/ESM4) isn’t doing well; it had reached its May high at 5264 in pre-market trading. Earnings releases this week will give insight into the state of the U.S. consumer, with Home Depot (HD) due tomorrow pre-market and Walmart (WMT) set for Thursday pre-market.
Strategy: (46DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 5075 p Short 5100 p Short 5575 c Long 5600 c | 64% | +265 | -985 |
Short Strangle | Short 5100 p Short 5575 c | 70% | +1825 | x |
Short Put Vertical | Long 5075 p Short 5100 p | 84% | +150 | -1100 |
Symbol: Bonds | Daily Change |
/ZTM4 | +0.05% |
/ZFM4 | +0.12% |
/ZNM4 | +0.17% |
/ZBM4 | +0.35% |
/UBM4 | +0.41% |
Bonds are staging a cautious rally at the start of the week where a litany of Federal Reserve speakers (including Fed Chair Jerome Powell himself, tomorrow morning) are set to hit the wires. As has been the case for the better part of two years, the April U.S. inflation report on Wednesday is likely to introduce a bout of volatility. There are no noteworthy Treasury auctions this week.
Strategy (39DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 101 p Short 101.125 p Short 102.875 c Long 103 c | 60% | +46.88 | -203.13 |
Short Strangle | Short 101.125 p Short 102.875 c | 65% | +203.13 | x |
Short Put Vertical | Long 101 p Short 101.125 p | 97% | +31.25 | -218.75 |
Symbol: Metals | Daily Change |
/GCM4 | -0.88% |
/SIN4 | +0.33% |
/HGN4 | +1% |
A softer U.S. dollar may be helping silver (/SIN4) and copper prices (/HGN4), but no such grace has been extended to gold (/GCM4). Nevertheless, technical patterns in both /GCM4 and /SIN4 remain relentlessly bullish on longer-term timeframes, suggesting dips are likely to be bought in the short-term. The pullback seen in April may have been a round of profit taking before the next leg up; neither /GCM4 nor /SIN4 have oversaturated long positioning in the futures market.
Strategy (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 2250 p Short 2275 p Short 2475 c Long 2500 c | 60% | +800 | -1700 |
Short Strangle | Short 2275 p Short 2475 c | 69% | +2900 | x |
Short Put Vertical | Long 2250 p Short 2275 p | 83% | +400 | -2100 |
Symbol: Energy | Daily Change |
/CLM4 | +0.70% |
/HOM4 | +0.61% |
/NGM4 | +0.36% |
/RBM4 | +0.84% |
Energy markets are being supported at the start of the week thanks to recent supply side data released at the end of the last one. The Baker Hughes weekly rig count survey released Friday showed the number of operating U.S. oil and gas rigs dropped for the third week in row, down to 603 total (from 605). Signs that U.S. energy production may be peaking are offsetting recent inventory figures that suggest that demand for energy products is starting to wane. The U.S. API crude oil stock change report for the week ended May 10 will be released tomorrow.
Strategy (32DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 71.5 p Short 72.5 p Short 83.5 c Long 84.5 c | 62% | +280 | -720 |
Short Strangle | Short 72.5 p Short 83.5 c | 70% | +1230 | x |
Short Put Vertical | Long 71.5 p Short 72.5 p | 83% | +130 | -870 |
Symbol: FX | Daily Change |
/6AM4 | +0.26% |
/6BM4 | +0.25% |
/6CM4 | +0.02% |
/6EM4 | +0.24% |
/6JM4 | +0.07% |
A drop in U.S. Treasury yields is giving major currencies a chance to push back against the U.S. dollar. With commodities broadly higher, the Australian dollar (/6AM4) has emerged as the top performer at the start of the week. On its heels are both the British pound (/6BM4) and the euro (/6EM4), whereby both currencies are weathering what should be a theoretically difficult environment as their respective central bank interest rate cut odds are pulled forward. Technically, it appears the U.S. dollar may be carving out a top, although confirmation or rejection probably does not emerge until the U.S. inflation report on Wednesday.
Strategy (53DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.055 p Short 1.06 p Short 1.11 c Long 1.115 c | 67% | +137.50 | -487.50 |
Short Strangle | Short 1.06 p Short 1.11 c | 72% | +462.50 | x |
Short Put Vertical | Long 1.055 p Short 1.06 p | 93% | +62.50 | -562.50 |
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
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.
