Welcome to this episode of The Futures Rundown brought to you by T4 Futures and Options.
With your host Mark Longo and guest Rich Excell, Gies School of Business – University of Illinois Urbana-Champaign
The Trading Pit
What’s catching our eyes in the futures markets this week:
- gold
- central bank policy rate cuts
- navigating the corn and soybean markets ahead of the upcoming WASDE report
- and much more.
TRANSCRIPT
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The futures markets can be downright scary.
Limit up, limit down.
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And now it’s time to break into the futures markets.
It’s time for the Futures Rundown.
All right, everybody.
That music means we are back with the newest addition to the network turning Wednesday, not just into education Wednesday, but to another double header here on the network because it is time once again for the Futures Rundown, the program where we break down all the action in the underlying markets.
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As we learn who’s joining us on the old hot seat this week, I am pleased to welcome on for the first time here on The Futures Rundown.
Our old pal, Mr.
Rich Excel, the clinical assistant professor at the College of Business over there at the University of Illinois.
Rich, welcome for the first time to The Futures Rundown, sir.
Hey, Mark.
Thanks for having me.
You know, I always love to be on the various shows.
Like you said, first time on The Futures Rundown, I’m looking forward to it.
I think we’ll maybe cover a little bit different stuff.
And so this will be exciting.
How’s everything going over there at the Derivatives Trading Academy over there at the University of Illinois these days?
Got any students tuning in today?
Thanks for asking.
The first semester of the Derivatives and Trading Academy, and we’re full bore, we’re halfway through the semester.
They’ve got a test tomorrow.
So I’ll tell you maybe on Friday how it’s going, but it’s, I know it’s going well.
There’s a lot of enthusiasm.
Of course, a lot of fun market moves for us to talk about in class too.
So that’s always fun because we’re getting them, not only teaching them about futures and options, but having them apply that in real time.
So that’s fun to do.
Oh, I like it.
What’s the first test on?
What are we learning?
Well, you know, the first test is on just, is really just kind of rehashing a lot of their knowledge on intro to futures and options markets, right?
So they need to know a lot about profit and payoffs for options, but then also we’re kind of getting into a little bit about constructing futures curves and the cash and carry arb and reverse cash and carry arb and how the cash flows work and how the timing of when or if you receive any asset when you buy the futures or trade spotter forwards, how that all works and logistically.
So they have to kind of understand what we’re doing before we really do it.
Oh, something that’s near and dear to our hearts on this program, the whole subject of settlement and delivery and all of that fun.
Do you get a truckload of crude oil dumped on your lawn in the middle of the night?
All that fun here.
We tackle that on the show.
Well, Rich, like I mentioned, when you’re not busy educating the next generation of derivatives traders out there, you actually cut your teeth in the world of futures.
I believe in FX.
This is your first time here on the futures rundown.
Give our audience a bit of an overview of your background in the world of all things futures.
Yeah, for sure.
As I said, I cut my teeth at the CME and FX options and futures.
Swiss franc, Deutsche Mark primarily.
If anyone remembers the Deutsche Mark before the advent of the Euro, I was there.
And then I moved into the world of global macro from there.
And so global macro, of course, we’re trading and we’re looking across all asset classes, all markets, and looking for the relative value opportunities from there.
When I moved to the world of hedge funds in the multi-manager hedge fund space, there was a point when I worked with a team of people to develop in-house our own CTA or commodity trading advisor to look across developing trend following algorithms to trade in the futures markets.
And then like I said, now I’m teaching about futures and options to the next generation.
As I try to teach them, they need to be John Connor because the machines are Skynet.
And so they need to be able to beat to defeat Skynet.
So that’s how I motivate them.
But I’m also working with a lot of companies to help them, companies that are not necessarily that are just retail oriented, et cetera, but that will have exposure to maybe ag markets, cattle markets, things like that, to think about how to develop hedging strategies for their businesses.
And that’s a bit what I do on the side when I’m not teaching.
John Connor, I like that.
I can get behind that.
I’m excited just thinking about it.
And I’m also excited about our first segment.
It is time to enter the trading pit.
It’s time to break down all the action that’s lighting up the futures markets this week.
What’s limit up and what’s crashing and burning.
Let’s find out.
It’s time to enter the trading pit.
All right, listeners, let’s get into it.
Let’s see what’s lighting up out here in the world of futures this week’s been a pretty active week out there and they run down some some quick winners and losers.
And I want to see what’s catching, catching riches.
I out there.
By the way, I know all the diehard future people have written in, you know, there are technically no losers.
If something’s selling off this week, you can be short.
I get it.
I understand that.
We’re just using that parlance here on the show for fun.
Make it easy people to understand upside and downside movement.
I do I do understand that you can be short these contracts as well.
I know Rich has some deep dives into some particular products he’s been watching as well.
So it should be a fun one.
Let’s do a quick run to the upside first here.
Let’s be optimistic.
Let’s do a little top 10.
See what’s lighting it up over the past week since our last show.
Number 10 this week, we’re going out to the world of crypto with the October EAT future.
So near dated ETH getting a little bit of a lift this week up two and a half percent.
Bitcoin right above it also the October future 2.58 percent.
Then let’s sneak in a micro as well.
That’s kind of cheating.
Bitcoin and Ether micros both there at the bottom as well.
2.58 2.61 kind of the same thing.
But we’ll let those sneak in for this week listeners.
Then above it, we have a contract near and dear to our hearts.
We just talked a lot about it last week on the show.
It is a Brent crude oil.
The DS contract up 3.06 percent crude oil very much on a lot of people’s minds out there.
Then above it an interesting one here.
Not one we’ve ever talked about on the show before.
The pork cutout DS future up 3.2 percent.
So getting very specific which I love.
Then number four a product we namedrop in the intro to this program.
Listen what the heck is our Bob.
Anyway, it’s coming in at number four the November contract up 3.63 percent.
And then we’re going out to the New York Harbor out there.
The heating oil the nove contract out there 3.7 percent.
Then back to our old pal WTI the focus of the show last week the November contract as well up three and three quarters percent.
And then number one this week our old pal Coco Coco’s been on the ramp page of late and continuing that this week the DS contract up 4.6 percent.
Rich what are your thoughts on those upside movers anything in particular resonating with you sir.
Yeah I mean a couple of things that stand out to me I mean obviously you look at WTI and Brent.
I mean that’s that’s the story to me that’s interesting because that I don’t think that story has played out.
We’re seeing a little sell off today because I think there hasn’t been any imminent retaliation and I’m think we’re in in the middle of holidays though in Israel so I’m kind of expecting it so I I know it’s always it’s always in everyone’s mind to fade the kind of geopolitical risk moves if you will but sometimes some something about this feels a little different to me if you will and then you throw in a little Chinese stimulus to the to the to the mix and I think it’s interesting to watch the price action in both Brent and WTI because you know ultimately you look at it and I know I look at I try to track inflation pretty closely and in oil is a big driver of inflation and we’ve got a CPI print coming out that everyone’s gonna be looking at saying hey what’s the Fed gonna do etc well to me keep your eye on oil because if oil reaccelerates that’s gonna pose some problems for for what the Fed’s gonna do and for the rest of it but then I think the other thing you mentioned our Bob I mean that to me ultimately that’s the that is the number one future number one commodity to watch because it impacts consumers and it impacts the election and here we are in a month to go to the election where the gas prices are are probably gonna matter to a few people when they kind of hit the button so I I think that one’s kind of a super interesting one to keep an eye on too I thought for sure you’re gonna get all excited about pork cut out there rich so you’re you’re surprising me here this week all right let’s go to the dark side now listeners again you can be short these you could be doing well to the downside but they’re moving to the downside this week number 10 the ultra t-bond the deese contract off 3.2 percent number nine we got our old pal soybeans going out to the eggs I have a feeling we’ll be going back there in a little bit the no contract they’re off three and a third then the number eight we’ve got silver the deese contract uncle Mike’s favorite here good old silver the deese contract off nearly four percent this week then keeping it in the metals we’re going out to as the Brit say the aluminium the deese contract coming in right above it they’re listeners off four and three quarters percent then we’ve got here number six number six we’ve got class three milk off four point eight nine percent the number five we’ve got good old soybean meal again the deese contract off five point two percent and then number four high grade copper going out to copper getting bass listeners in the metals the deese contract off five point three two percent number three getting precious now but still staying in the metals I’m seeing a theme here to the downside this week listeners platinum going longer term though the Jan contract that’s interesting the Jan platinum contract off five point eight percent then number two one of our favorite products here just because it shows up with seeming irregularity here these days cash settled cheese the no of contract off six and a quarter percent and the big dog to the downside this week listeners Nat gas the no of contract off eight point six three percent so we’ve got some winners and some losers in the energy complex rich I know you’re all about the cash settled cheese sir does it surprise you that it’s off about six and a quarter percent this week it really does it does surprise me and he got the class three dairy on there too and like what what the heck’s going on north of the border here I don’t know what’s going on north of Illinois but that that does that does kind of strike me a little bit and I mentioned before that the the Chinese stimulus and you mentioned aluminium and platinum and you know all the different industrial metal silver even that are that are on the downside this week like it’s kind of kind of interesting that the metals the industrial metals markets are are kind of you know it’s saying shaking their heads yeah maybe not maybe maybe not good enough so there’s a few interesting movers I think on that list let’s check in really quickly on what’s lighting up the tape here today listeners from a volume perspective let’s see how much this correlates with that list we just broke down in terms of the winners and losers this week this is our top 10 most active futures as of right now coming into the start of the show today we had to do a little bit of adjusting to this list we had some micros those pesky micros sneaking in there in the S&P and the NASDAQ so we we cut those out those be somewhere in our number two and number four in the list otherwise so micro that’s kind of cheating it’s not really 900 700,000 contracts at the end of the day so an adjusted edited top 10 here for a list of number 10 listeners the ultra T bond we were just talking about that in our winners and losers for the week the DS contract 169,000 of those on the tape today number nine we’re going out to the 30 year that’s the DS contract as well 212,000 contracts on the tape today number eight going out to three months so far haven’t seen so far popping into this list in a little bit but it’s popping in there today the DS contract 238,000 on the tape then number seven back to our old pal WTI the no of contract 261,000 contracts on the tape number six the NASDAQ E-mini DS contract on the tape going out to December everyone’s fixated on near day to these days but it’s December lighting it up today 274,000 of those futures on the tape number five back to the rates the ultra 10 year 313,000 of those the DS contract on the tape there as well number four keeping in the rates it’s the two year the DS contract as well 415,000 you can see how much of the volume out there these days is in the rates complex number six we kicked out those pesky micros we’ve got the S and P E-mini at number three listeners the DS contract as well 587,000 contracts on the tape and then two and one back to the rates complex number two the five year note DS contract 629,000 contracts on the tape and the big dog as usual week after week these days it’s the 10 year DS contract almost a million on the tape already 963,000 so that one lighting it up rich any surprises for you in our most active futures today no I know there’s not and I wonder if there isn’t a common thread kind of weaving through all that where you see so much action in the rates market from the from the short very short end to the very very end of the curve and I wonder to what extent the adjustments that we’re seeing in the rate expectations are impacting some of those other things like in the equities markets but in how much of that adjustment in rate expectations is coming from from that move in WTI as well so I think I wonder if there’s not a common thread that’s kind of weaving through all of that activity we’re seeing where ultimately it’s it’s tied into what’s the Fed gonna do well rich I know you’ve been taking deep dives into a lot of the products I just mentioned here so let’s hit on a couple of those now in particular listeners if you want to follow along rich write some fun articles over there at CME group just go to CME group.com and look for his is column it’s called Excel ex C E L L with options the most recent one coming out is mining economic drivers for the next move in gold so gold’s been an intriguing one to watch obviously with the Fed coming out with their quote unquote surprise half point rate cut that’s obviously making gold have a little bit of a run extending a run that’s already been pretty good so far this year but you’ve been looking at gold from a fundamentals as well as from a vol perspective what’s catching your eye in the gold market right now rich yeah I mean how can you now we look at gold right here we are at all-time highs it’s super interesting to look at I don’t know if you saw their interesting article about Costco selling gold bars now I know it was new to me I hadn’t I hadn’t heard that once I saw it this week yeah I heard about that and then they sold platinum as well didn’t they yeah and so I mean and sold out and they sell out in minutes I think yes yeah so clearly there’s a lot of demand or a lot of interest in gold right now you know when you’re out when you’re rolling to Costco rich you want a buck 50 hot dog and then you know a thousand dollar bar of platinum that makes sense right as you do right and maybe pick up a casket and some aluminum siding before you head out too I mean that’s that doesn’t that’s America right it doesn’t get better than that but so I’m like what do you know I always ask yourself what’s driving it right and so I did one thing I didn’t mention in my background and in futures and in his futures and spot but when I worked at at Swiss Bank back in the 90s I did trade gold and precious metals for a while and so I’m like okay well why don’t I go back through and say what you know what are the some of the ideas that people typically will tell you why they’re buying gold right and so one and let’s look at that inflation it was in the article I saw about Costco inflation was the reason given inflation is a reason a lot of people would give you why they’re buying gold so I took it I took a look at I looked at the price of gold versus the inflation surprise indices at both global and US and as you look at it you’re like okay it’s how this held for a long time but since over the last 18 months to two years gold’s going higher and inflation surprises have gone lower so it’s not inflation it’s really your inflation surprises that are really driving this move so what else could it be I’m like well central bank balance sheets the growth essential bank balance sheets we you know the amazement of fiat currency that’s that’s an argument that we kind of have heard for this you know test of time when it comes to the you know for gold bugs the reason to own gold and again that kind of fit pretty well the data fit pretty well until about Covid when balance sheets exploded and gold came up for a while but then it basically went sideways for a long time and and since 2022 global balance sheets have been coming down but you know in the last couple years again gold’s exploded higher so they’re really the last parts of the move here the last two years really don’t seem to be tied to what we’re seeing in central bank balance sheets you know looking at like supply and demand of course any time you’re looking at the futures markets we want to be thinking about that but looking at the supply and demand data it’s really not the driver looking at retail interest in the ETF space of whatever the shares outstanding that’s started to tick up but just really recently and had actually have been falling for four years before that so that’s probably not what’s looking at it and real interest rates we just talked about interest rates I mean that’s always one that we would kind of think about and if anything the real interest rates are telling you gold should be go lower not higher you know global geopolitical risk you look at measures of risk that we could across different markets you know economic uncertainty risk VIX if you will move index just different measures of risk across markets and there tend to be more on the low is not on the highs and gold on the highs and so you know you’re looking at it and you’re like don’t seem to be a lot of those fundamental drivers but at the same time you look at it and clearly gold is trending but as I was looking at the charts technically what I noticed is that we had both all the daily weekly and monthly charts were all very overbought and so then as I was kind of looking through like what’s the trade here is the idea like okay I can’t really find a good fundamental reason to want to hold on to this gold technically it’s looking overbought on all three periods and so this sounds like something where I want to kind of fade it if you will and you know but I have to be cognizant of the fact that if I look at if I look at a position you know like you know look at the commitment traders and that’s kind of at five-year highs in terms of length etc so I want to do this via the options market because it is trending right so you don’t want to fade strong moves right and so you got to be careful on those counter trend moves and you actually look you look at you know the C vol market and you look at what’s going on the options market and and vol has not been responding to this latest move higher which potentially offers an opportunity to use a vol structure to fade the movement so what I look to set up is what what I would call a split strike fly some might refer to as a broken wing fly but for me a broken wing fly is asymmetric in a little bit different way than this one so I just looked I went out to November said I okay I want to get past the election etc and I’m just going to basically buy you know a 2550 put sell a couple of the 2575 and then buy one of the 2625 and so it’s a little asymmetric because if it if gold were to completely roll over and move and move a lot lower I still make a little bit of money is right normally when with flies people struggle because you have to really pinpoint exactly where it’s going to stop but this one if it keeps going I still make some money I have to pay a little money upfront for that but I don’t mind paying a little bit of premium when I’m fading a strong trend and looking for a counter trend move because that’s it’s still going to give me a defined risk and I know you know there’s no free lunch out there so I have to pay a little bit of money so I figured that was kind of a to me a good structure to fade a move that is clearly technical in nature where I couldn’t find a good fundamental driver but there wasn’t really an imminent catalyst for it to roll over other than the fact that maybe things are looking a little bit overbought here and so that’s that’s kind of how I kind of came up with it looking at through using the different tools available to us at the CME to try to analyze not only the moves that are happening but how we might want to implement some of our ideas.
That’s fascinating I want to keep going on that but we have more to even to discuss so you know I guess Rich you don’t have enough time to just write the excel with options I guess you get bored you have to put thoughts on your sub stack as well sir because I noticed you were putting down some interesting thoughts on your sub stack about the equity market and what we’re seeing out there right now kind of echoing some of the things I’ve been wondering about as well but you actually have some good data to back them up here as well I kick things off and his sub stack is entitled I’m not saying I’m just saying listeners we talk about the I think ridiculous number we had just a week or two ago the non-farm payroll number blowing the doors off over a quarter of a million when they were expecting about a hundred and fifty thousand so over a hundred thousand more just crushing it by just about any metric out there the markets of course as they are want to do kind of rallied off that a lot of people thought maybe this was the sign that things are looking good but even before that going back to something that I mentioned earlier something I’ve kind of been mulling over I think a lot of people have obviously been mulling over this as well as the Fed taking that surprisingly aggressive move to go a half point and they are not alone a lot of central banks have been out there cutting and just easing very aggressively right now in fact you put together a chart here and I think we’ll walk the tweet it out so our listeners can see it as well listeners but this chart kind of really puts it in stark relief what I’ve been kind of trying to put my words on for a while here which is effectively that this past September when the Fed did their half point cut was the fourth biggest month for central bank policy cuts this century now you’re going back obviously century sounds like a long time we’re not going back a hundred years obviously this century listeners but still when you think about this last 24 years nearly a quarter of a full century a lot’s happened we’ve had of course the great financial crisis back in 0809 that was close to where we are right now slightly higher then of course March of 2020 when everyone and their mother had to cut before obvious reasons and then now here we are September of 24 equity markets at new all-time highs pretty much every day it seems like underlying stocks at new all-time highs across the board and yet we have the third actually fourth overall fourth biggest month if you count December of 08 and March of 09 as separate even though that was all one big crisis lump together but if you take those months separately we this is the fourth largest month for central bank policy rate cuts since 2000 and usually like you see in this chart rich we’re usually at some pretty dire moment in the global economy when we have to do this and yet right now it’s completely the opposite and we’re just throwing fuel on this fire sir what are your thoughts on that yeah I mean it’s I think as you said it would probably shock a lot of people I don’t think they really understand a lot of people don’t understand the magnitude of what’s what’s been kind of going on in terms of global central bank policy here you know we’re talking about the expectations of a soft landing and everything seems perfectly normal and fine and you know this growth is going to like lead stocks higher inflation is coming lower so you know now we got top line increasing we got margins increasing and this is all good earnings are going to increase you gotta buy stocks or you gotta buy everything then if that’s the case then then why don’t we have such aggressive central bank policy like I said we had the same number of cuts in September as we had in December of ’08 I remember December of ’08 it was pretty bleak out there and then at the same time we had the same number of cuts basically this month we’re in everyone’s telling you it’s all good and so I mean what that’s leading to is like we’ve seen it in a couple other charts that showed is that liquidity liquidity is very you know is sloshing around in the markets out there and as a result not surprisingly we’re seeing a level of positioning in you know S&P futures for instance that is you know the highest we’ve seen in 10 years which isn’t surprising when if things are really as good as everyone says and yet this liquidity is being pumped in you know why wouldn’t you own stocks that is definitely the market into own stocks it’s all good I guess one of the biggest concerns one might have is that everyone might be leaning on one side of the boat and so then they always ask the question is like what could go wrong right what could go wrong it’s all good we got rate cuts come in center I’m like so then I’m like well maybe we want to look at what could go wrong in and what we’ve seen here maybe this week the last few days is that the bond market is starting to reprice a little bit of its expectations expectations if you remember excuse me just past the FOMC in September the bond market was still much more dovish than the Fed dots were in terms of where the Fed was saying that they were going to be them the bond market was once more dovish expecting more cuts than even the even this year the rest of this year than what the Fed was telling you and in the last the last several days those the market the Fed funds futures have moved back to where almost right in line with where the Fed dots are and one might argue the Fed dots are still too dovish but at least the bond markets move back in line and and we’ve seen that impact that the two-year yield right we’ve seen the two-year yield move up close you know close to 4% etc and so that’s something that that’s also been one of the one of the three legs of the stool underpinning markets was Fed rate cuts is that starting to get priced out a little bit you know next to the next one is inflation falling back to earth generally improving the situation for consumers for companies etc we get a CPI number tomorrow so we’ll get a little bit more on what what’s going on there but I just started to look at what else what might be driving it we talked about oil before what other things are have been big drivers house prices house prices certainly are don’t seem to be coming lower anytime soon and they continue to be positive year over year with with what we’re seeing with falling mortgage rates with with discussion of maybe giving people some money to buy a first home some other some other ideas you know is that going to potentially lead to to higher inflation higher house price inflation then you look at the two big drivers out there are monetary policy you know M2 growth has has been going positive here quietly pretty strongly for the last 18 months and that’s adding to that liquidity in the market but that has tended as Milton Friedman tells us and as the empirical data shows us leads with a year that leads to inflation and it’s been going up for over a year so will inflation start to tick higher and and the last one I wanted to point out is like fiscal policy right in and and we’ve been running some some good fiscal deficits for quite a long time now and that that also points to higher inflation so after whatever the number is tomorrow when I look at the trends of what it could look like for the next several years you know the inflation is starting to get me a little bit worried as well and then then the question becomes down to to growth and you pointed to the strong jobs number you know to me you know growth is a lagging indicator housing is a much more leading indicator housing and new orders and so I’m more focused on those and I think the jury’s a little bit out on that so I’m just again not trying to be not trying to be a bear I’m just trying to say everything everyone thinks everything’s all good what could go wrong and these are some of the things I was looking at that could go wrong yeah I mean I can’t argue with any of that I think this chart kind of says it all it’s one of those a picture is worth a thousand words they’re rich and I’m working folks find your sub stack if they want to see this for themselves yeah I might my sub my sub stack is called stay vigilant so if you just go on the sub stack or if you go to stay vigilant dot sub stack calm you can find it and I try to I try to tweet it out as well but but yeah you can certainly find it on that sub stack platform which I think I think there’s a lot of great content on that platform too so I’d encourage if anyone hasn’t gone on that I would encourage you to go on and not just to see read what I’m writing but there’s a lot of a lot of good content that’s being put out there well speaking of good content rich is not done listeners somehow he has time to analyze all this on top of educating all these students over there at the derivatives of trading Academy over there but I mentioned earlier I say we’re gonna come back to soybeans and eggs we’re gonna do that right now listeners another recent excel with options report that rich put out entitled navigating corn and soybean volatility ahead of the October was D report and you might be saying what the hell is the WASDE report well it’s coming out soon October 11th so we have great timing on this one listeners WASDE report W a s d e stands for the world agricultural supply and demand estimates and that’s not enough acronym soup for you is put out by the world agricultural outlook board the w a o b so eggs just full of alphabet soup their listeners but that’s what we’re talking about obviously a key volatility and price action driver in the AG markets it’s coming up in a couple of days Mr.
Rich what have you spotted out there in the corn and soybean markets ahead of the WASDE report sir yeah so if we go back to last month’s was me and what anyone who’s been looking at corn soybeans for this year really kind of going into last year it’s been a relentless decline right for the for all of the year and it’s just been like I said relentless it just keeps you know it is just trending and feels super happy for all the different drivers you can think of of excess supply lack of demand from overseas etc but after last month’s report which by all accounts was was probably at least particularly for corn a lot of a lot of people’s reaction was that it was a bearish report in terms of of the expected bushels except expected yield etc so you know one might think that prices would have continued lower or however what we’ve seen over the course of September is is is corn and soybeans to a lesser extent had a very sharp rally from the lows and so you know that’s that that trading instinct kicks in right when when prices move in the opposite direction of where you think that that fundamental might suggest that kind of suggest that maybe there’s something else going on and sure enough we see that the short in corn had you know been cut more than kind of cut in half over that period of time and the short in soybeans was cut to but to a lesser extent and so we’re definitely seeing some short covering so I wanted to take a look and I mean we talk about prices moving you know moving higher even though with bearish news I mean that kind of goes back to that classic trading book Reminuses of a Stock Operator just I mean that’s a Jesse Livermore favorite that when you know when prices don’t decline in bad news it’s time to go to the other way right and so like well is it the time to go the other way and and I took a look at it maybe through a little bit different lens and I wanted to look at it from a relative value standpoint and say what about you know what about going you know instead of going long corn or soybeans or you know and on their own what about looking at on a relative value long corn short soybeans how that relative price look and if we look at over the last year corn and soy has been kind of in a pretty tight trading range the relative prices of them but after that report and over the course of the month of September they’ve broken out to the top side of that one year trading range and if you widen that out and look at it over five years while it looks extended on a one year basis because it’s been kind of breaking out here above the top end of the range it looks like you could have a lot further to go on a relative basis on a five-year view and so saying okay the potentially is there a catalyst here for a continued relative move in corn versus soy because the short base is still higher in corn than soybeans and so we saw short covering after last was the could this be a catalyst for more short covering and continue this move looking into the vol market again looking at the sea vol etc corn sea vol is actually near the lows of the year and soybeans are near the highs of the year and not only that but comparing the two to each other historically corn almost always on a sea vol basis almost always trades above soy if not well above soy like sometimes that spread can be up to ten points and they’re trading at pretty similar levels actually and so that kind of again perks me up like okay you know maybe there’s an opportunity to be long corn options versus soy options as well so there’s a directional bias there’s a volatility bias perhaps and we know looking at it that they’re pretty highly correlated products and so that’s that you know that’s one thing you want to make sure that when you’re doing something on an RV basis that there is a correlation between them and then see he’s got a great tool the event volatility calculator you can see what what’s priced in what’s expected there’s really no expectation for a catalyst in the soybean markets using the invent volatility calculator and if anything in the corn markets it looks like they’re pricing in lower volatility from the from the event from the catalyst and so that all kind of made me think that it’s time to express a directional in volatility view relative value so I decided to go long corn options and short soybean options and I did it on a three to one basis where I’m long three corn options and short one soybean I looked at the at the upside calls on each and then of course you know in that side scenario you know obviously you know the as long as the correlations hold if if everything moves higher I’m gonna do better because I’ve got more leverage to the upside because I’m long more options if they both go lower and it’s a complete fade I’m net premium neutral so I’m not going to be losing any money on that the risk is of course that corn sits or kind of maybe goes a little bit lower and soybean takes off that would be my risk I think given the setup looking at the technicals looking at what we’ve kind of talked about fundamentally and looking at the kind of the short base I felt like that was a risk that was worth taking and so that’s kind of how I was looking to set it up I imagine not a lot of people are always looking to play RV trades in corn and soybeans via options and so I thought it might be an interesting thing to throw out there.
Fascinating deep dive into multiple contracts this week listeners you went into AGs, equities, a little gold for you all sorts of fun the trading pit this week I was going to get into some symbology and some contract month crows but kind of run a little long so tell you what we’ll say that for your next appearance Mr.
Rich instead we’ll get into a little bit you are the educator after all you can educate us all on why these contract month codes make no sense in futures as we keep on rolling into a little bit of the old futures free for all.
Ring the bell.
It’s time to take on all comers in an epic Q&A battle royale.
All questions can enter but none can leave without an answer.
It’s time for the futures free for all.
Alright welcome to the futures free for all this is of course the listener engagement segment you folks get to sound off on what’s what’s float in your boat out there what’s catching your eye and actually rich I wanted to get your thoughts on the results of our recent question of the week out there because we were just talking about government stimulus out there and fed stimulus out there for the market and the fact that we’re at all time highs and also the fact that we have oh and I’m not sure if you heard there is an election imminent coming up in the next month so that’s certainly a catalyst for a little bit of volatility a little bit of concern out there in the markets we asked our audience this time a week ago the election is looming what is your trading plan through election day gave you four different choices you know stay long stay the course so pretty much just stay put don’t change anything or get flat go to cash maybe you’re feeling a little bit nervous out there right now or you’re feeling very nervous you’re getting short or you’re just hedging your portfolio pretty aggressively or maybe you’re just keeping things bite size you’re just trading small and staying intraday and mr. rich it was kind of a tight fight most of the week at the end of the week stay long stay the course ended up taking it with thirty nine point three percent followed by thirty two point one percent saying they want to trade small keep things intraday only not really bite an awful lot certainly not a lot overnight or not a lot on the weekends which has its own risks these days and then twenty one point four percent so they want to get flat or go to cash and then about seven point one percent are feeling really dire out there right now they say they want to get short or hedge their portfolio rich I’m curious what are your thoughts on what our audience is doing heading into the election sir well I mean it’s tough not to stay long given the liquidity has been pumped in it does worry me a little bit that that everyone’s kind of leaning one way but not doesn’t worry me enough to want to kind of go short to me I guess I would have probably fell somewhere between trade small and go to cash not and I don’t think of going to cash in terms of a nervousness get flat I think of it especially near the election of being in cash to have that dry powder to take advantage of any sort of obscure moves you’re going to get coming out of the election which I think with all the uncertainty going into it that there’s a possibility of that so I like the idea of dry powder in the days that follow and to trade any opportunities but I guess to me I guess if I had to vote I would be in the trade small and true day only with the idea that I’m going to kind of keep things in cash in and around that election to wait for the fat pitches they say you know we may have to adapt and update that question in the coming weeks I we just had the folks from interactive brokers on our pro Q&A yesterday and they were talking about they just got approval to list binaries effectively on the election so you can go to their platform right now and effectively put on they’re not really futures they’re effectively binary options listeners on whether you think Trump’s going to win or lose whether you think you know Harris is gonna win or lose almost every race you can think of in the country they have listed contracts I know this has kind of been the Holy Grail for a lot of platforms for a long time I know the folks that Nate X years ago were trying to get this and they never thought the CFTC would really approve it and here we are rich it’s a very different era you can actually trade on the election now on listed contracts on maybe not exchanges because they’re not doing them CME but they’re doing them on a platform that people have actually heard of like IB and others so I guess you can all literally trade the election now rich so maybe that’s something we need to factor into our calculations going forward what do you think yeah I mean for sure I think well for a long time even kind of going back going back a long time when we had the there’s the I was at the Iowa political exchange or Iowa betting exchanges and there’s in that kind of a I think University of Iowa might have done where they had this kind of betting markets or elections like to me there’s a lot more information in these kind of election betting markets than there is in any sort of surveys or polls you’re going to get because if someone’s willing to put some money in the line I’m more willing to listen to that opinion than then what someone says when they answer someone asking a question so I think that I think there’s a lot of potential interest and information in those markets yeah I was just checking the volume yesterday and they haven’t been listed that long and already a little north of a quarter of a million of the binaries on Harris have traded about 80,000 on Trump so I don’t know read into those volumes what you will obviously can go both ways on binaries yes and no but I think most people lean towards the yes side kind of the oversight so intriguing intriguing data out there listeners and rich if folks want more intriguing data they want to check out your excel with options column or plug your sub stack again have at it sir the floor is yours yeah for sure I’m so if you go to see me see me group comm and you go you look on on the education page in the insides you’ll see my excel with options and then I do a bi-weekly piece on the various markets and then I do a monthly AG special piece around the WASD reports and each month each each week or every other bi-week I should say every other two weeks I’m covering a different market that of see me product and so just trying to use that to get people thinking about the ways you might want to use options instead of futures to implement some of your ideas and then like I said the my sub stack is called stay vigilant so stay vigilant that’s upset calm and on Twitter you find me at excel Richard if you want to look for me on on on Twitter acts as it’s called so yeah any any of those places I try to kind of share out stuff on a daily weekly bi-weekly and monthly basis a lot of great data a lot of great analysis there we just scratched the surface of it on the show today listen you could see there’s a lot of great data waiting for you to make sure you’re following rich and checking out his articles on those various platforms while we’re checking out platforms online make sure you check out our friends over there at CTS futures calm great futures platform also an options offering there as well so if you’re thinking about dipping your toes into the world of futures options they got you covered there as well a CTS futures calm the place to go to learn more to get on out of here for today back again tomorrow with our usual Thursday double-header first off we’re gonna be on the option block with our friends over there at SIBO then back with this week in futures options talking about the options side of the futures market with our friends over there at CME Friday of course volatility views and we’re back one final time exclusively for our pro members coming back for a little bit of options oddities you could find that for yourselves at the options insider dot com slash pro the place to go to learn more then we’re all for the weekends and then we’re back again next Wednesday another episode of the futures rundown stay safe out there everybody thank you for tuning in to the futures rundown proudly sponsored by T4 futures and options experience the T4 futures and options trading platform with its seamless desktop and mobile applications low latency and professional functionality tailored for traders and brokers alike take advantage of T4 theoretical sheets strategy solver mbo advanced charts and much more empower your trading journey with T4 futures and options visit CTS futures dot com or search 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