S&P 500 Eyes Comeback as Bond Yields Rise
S&P 500 Eyes Comeback as Bond Yields Rise
Also, 30-year T-bonds, gold, crude oil and Australian dollar futures
- S&P 500 E-mini futures (/ES): +0.57%
- 30-year T-note futures (/ZB): -0.31%
- Gold futures (/GC): -0.28%
- Crude oil (/CL): -0.88%
- Australian dollar futures (/6A): +0.14%
U.S. equity futures are making a comeback this morning despite a headwind from rising bond yields. The S&P 500 is in focus after closing yesterday at the lowest level since May. Federal Reserve rate hike bets may move on U.S. economic data due this morning while traders keep their eyes on the conflict in the Middle East, where Israel is intensifying its air campaign in Gaza.
Symbol: Equities | Daily Change |
/ESZ3 | +0.57% |
/NQZ3 | +0.58% |
/RTYZ3 | +0.87% |
/YMZ3 | +0.49% |
The S&P 500 is rising this morning as it looks to snap a four-day win streak, with /ESZ3 up 25 points. Despite the lowest close since May yesterday, critical support remains in place from the early October intraday levels, although traders are fighting against rising bond yields. U.S. purchasing managers’ indexes are in focus this morning as well as the ongoing air campaign in the Middle East.
Strategy: (51DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 4220 p Short 4225 p Short 4290 c Long 4300 c | 8% | +980 | 497.50 |
Long Strangle | Long 4220 p Long 4300 c | 51% | x | -8,980 |
Short Put Vertical | Long 4220 p Short 4225 p | 57% | +82.50 | -162.50 |
Symbol: Bonds | Daily Change |
/ZTZ3 | -0.04% |
/ZFZ3 | -0.06% |
/ZNZ3 | -0.07% |
/ZBZ3 | -0.06% |
/UBZ3 | +0.14% |
Bond sellers are back, with yields rising across the curve this morning after two days of safe-haven buying that saw the 10-year yield rise to the highest level since 2007. Traders are shifting the focus back to monetary policy after Hamas released several hostages, which seemed to cool fears that the conflict could spiral out of control. The 30-year Treasury bond(/ZBZ3) is down nearly 0.5%.
Strategy (31DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 107 p Short 108 p Short 112 c Long 113 c | 34% | +625 | -375 |
Long Strangle | Long 107 p Long 113 c | 40% | x | -2,093 |
Short Put Vertical | Long 107 p Short 108 p | 66% | +312.50 | -687.50 |
Symbol: Metals | Daily Change |
/GCZ3 | -0.65% |
/SIZ3 | -0.84% |
/HGZ3 | +0.33% |
The rally in gold prices sparked by the Israel-Hamas conflict might be over, at least for now. Gold prices (/GCZ3) are down 13.30, or 0.68%, this morning. Prices rallied more than 7% over the past several weeks, with many shorts caught on the wrong side of the trade. U.S. purchasing managers’ indexes due out this morning is in focus but continued profit taking appears to be moving prices today.
Strategy (34DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1960 p Short 1965 p Short 2000 c Long 2005 c | 19% | +410 | -90 |
Long Strangle | Long 1960 p Long 2005 c | 45% | x | -4,660 |
Short Put Vertical | Long 1960 p Short 1965 p | 30% | +240 | -260 |
Symbol: Energy | Daily Change |
/CLZ3 | +0.16% |
/NGZ3 | +1.71% |
Crude oil prices moderated this morning after yesterday’s nearly 3% selloff, which marked the largest drop since early October. Price sensitivity to the Middle East conflict remains but traders are turning their focus to U.S. inventory data from the American Petroleum Institute (API) due today. Traders expect to see a build of 1.5 million barrels after last week’s 4.4 million barrel drawdown.
Strategy (52DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 82 p Short 82.5 p Short 88.5 c Long 89 c | 19% | +380 | -120 |
Long Strangle | Long 82 p Long 89 c | 47% | x | -6,610 |
Short Put Vertical | Long 82 p Short 82.5 p | 55% | +230 | -270 |
Symbol: FX | Daily Change |
/6AZ3 | +0.25% |
/6BZ3 | -0.44% |
/6CZ3 | -0.21% |
/6EZ3 | -0.54% |
/6JZ3 | -0.19% |
The Australian dollar is benefiting from improving risk sentiment across markets, which comes despite an accelerating Israeli air campaign in Gaza. /6AZ3 is also moving off yearly lows, suggesting some speculative buying in the asset even as the dollar gains against the Euro (/6EZ3).
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 0.625 p Short 0.63 p Short 0.645 c Long 0.65 c | 33% | +320 | -180 |
Long Strangle | Long 0.625 p Long 0.65 c | 40% | x | -880 |
Short Put Vertical | Long 0.625 p Short 0.63 p | 70% | +160 | -340 |
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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