We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Mixed
USD/JPY
Bearish
Gold
Bearish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Bullish
More View more
Real Time News
  • $USDJPY Daily Pivot Points: S3: 108.29 S2: 109.6 S1: 110.16 R1: 111.46 R2: 112.2 R3: 113.5 https://www.dailyfx.com/pivot-points?ref=SubNav?utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • The $SPX ended a 92-day trend trading above the 50-day moving average Monday https://t.co/9LCJ9TssGF
  • Forex Update: As of 21:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.60% 🇯🇵JPY: 0.47% 🇨🇭CHF: 0.29% 🇨🇦CAD: 0.11% 🇦🇺AUD: -0.05% 🇳🇿NZD: -0.28% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/LG4HGxYIXO
  • It will be a while until we know the true outcome of this poll (did we see the $SPX top last week or not), but seems the majority for now still say "no" https://t.co/mfPCYUx1wt
  • RT @ballmatthew: Summary of weird: - Bob is 14 months into 36 month extension - Didn't do this during blow-them-away earnings a few weeks a…
  • Commodities Update: As of 21:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.52% Gold: -1.46% Silver: -3.41% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/mhWPSlN67M
  • Precious Metals Update: #Gold 1,648.72 (-0.65%), #Aluminum 1,699.00 (-0.85%), and #Copper 5,689.00 (-1.32%) [delayed]
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.80%, while traders in USD/CAD are at opposite extremes with 69.82%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/xuUp4rblhb
  • Commodities Update: NYM WTI Crude 49.87 (-3.03%), ICE Brent Crude 54.79 (-2.68%), NYM NYH Gasoline 152.78 (-5.05%). [delayed]
  • RT @FirstSquawk: TRUMP SAYS IF HE LOSES U.S.ELECTION THERE WILL BE A STOCK MARKET CRASH "LIKE YOU NEVER HAVE SEEN BEFORE " SPOKESMAN
Stock Option Volumes Reflect US-China Trade War Fears

Stock Option Volumes Reflect US-China Trade War Fears

2019-08-12 21:15:00
Peter Hanks, Junior Analyst
Share:

Dow Jones, S&P 500 Forecast:

  • Option traders jostled for position on assets at the extreme end of the risk curve in funds like JNK and EEM as sentiment soured on Monday
  • The Dow Jones, S&P 500 and Nasdaq 100 may continue to feel pressure until a positive development is made
  • Interested in equities? Check out the DailyFX Podcast with Andrew Milligan, head of global strategy at Aberdeen Standard Investments

Stock Option Volumes Reflect US-China Trade War Fears

Stocks traded lower on Monday as the continued strain of US-China trade war weighed on risk sentiment. The resultant attitude of traders saw gold prices surge above $1,500 once again, while US treasury yields slipped considerably. The widespread risk aversion was not only reflected in price action, but also options volume which revealed traders were clamoring for downside protection on a variety of “riskier” exchange traded funds.

Stock Option Volumes Reflect US-China Trade War Fears

Data source: Cboe

Data collected by Cboe reveals the most active put contracts were dispersed across a variety of funds, two of which look to offer a comparatively high return and are therefore exposed to greater risk. Traders were particularly bearish on the JNK ETF which seeks to offer a return like that of a junk bond. The most active strike prices were comfortably beneath JNK’s Monday closing price of $107 as traders bet the equity turmoil will continue and look to capitalize on potentially larger losses that might occur in very “pro-risk” vehicles.

JNK ETF and S&P 500 chart

Chart created with TradingView

To that end, the emerging markets EEM ETF was another fund that saw a series of bearish bets. While EEM includes many emerging market economies, the fund is heavily weighted toward China at nearly 31% of its total holdings. Traders could be looking to explore a bet on deteriorating emerging markets at large, instead of China specifically through the FXI ETF, due to developing equity turmoil in Argentina – or as a way to exploit slowing global growth from the US-China trade war. Either way, the headwind offered by the economic conflict has become widespread and the lack of positive developments has begun to weigh more heavily on risk assets which has sent the EEM to S&P 500 ratio to its lowest since 2003.

EEM ETF and S&P 500 price chart

Chart created with TradingView

According to Factset, over 90% of companies in the S&P 500 have reported earnings for the second quarter and there has been a 40% increase in the number of companies citing “tariffs” in Q2 versus Q1. This is particularly significant because the sizable uptick occurred well into the trade war and many companies reported before the newest tranche was threatened.

Sign up for our Free Weekly Equity Webinar in which critical technical levels and fundamental themes are analyzed each week.

The persistent and increasing nature of these tariff concerns speaks to the lasting pressure they can provide as opposed to a one-and-done shock after they are enacted. For more technical analysis and fundamental updates on the major equity markets, follow @PeterHanksFX on Twitter.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Dow Jones, DAX 30, FTSE 100 Forecasts for the Week Ahead

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.