**See my monthly column, “Futures for You” in Stocks and Commodities Magazine.
The Treasury futures trading pits continue to struggle with light volume and a lack of economic news. The single news release during today’s session was the Leading Indicators which was reported in line with expectations at a negative .1%. Adding to the theme of quiet trade, Japanese bond markets were closed for the day in recognition of a holiday.
The long bond spent the entire trading day forging a technical range between about 114’16 and 114’02. Prices saw both sides of this range multiple times. Similarly, the 10 year Treasury note futures were stuck in a rut between 113’19.5 and 113’10.5 for a majority of the trading day.
I hesitate to use the term boring in conjunction with the futures markets for fear that it may be misconstrued as being “low risk” and we all know that is certainly not the case. This is the most lackluster trade that I have witnessed in quite some time. As an option seller, this is the type of market condition in which one prospers. Unfortunately, the market hadn’t reached my downside target in time to take advantage of this implosion in implied volatility. Rather than “crying over spilled milk” I will patiently wait for the long bond to trade at or near 113’09 before looking to sell put premium. Forcing trades out of boredom almost always ends in disaster and I prefer to avoid that scenario.
Insiders claim that the markets are pricing in a quarter point rate cut in the September FOMC meeting to the tune of a 48% probability. Based on market valuations, it is also said that traders are beginning to speculate on another 25 basis point increase by December.
The remainder of the week may likely see similar light volume trade. There are only a handful of economic announcements and even fewer that are capable of moving the markets in any significant manner.
Option Recommendations
**There is unlimited risk in naked option selling.
Flat
Futures Recommendations
**There is unlimited risk in trading futures.
Flat
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Carley Garner
Alaron Research Team
800.935.6492
cgarner@alaron.com
There is a substantial risk of loss in trading futures and options.
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