Published On: Wed, May 30th, 2018

A tactical short in Jan 2020 Fed Fund futures

InstaForex

Background

This outlines a tactical short in Jan 2020 Fed Fund futures given adverse moves over the last few trading days, with the market price at 97.6350 in Asia on Wednesday morning, the market is implying +2.66x hikes between now and the end of 2019 19 months!). 


 The tactical thesis here is that this has been a overshoot driven by position clearing out, risks in Europe, EM and the Korean Peninsula.

Management and risk description


300bp risk with a stop at 97.900

Key risks are of course:

  • A lot more pain on the position clearing that we’ve been seeing in the Fed Fund futures (i.e. more noise)
  • Italy/Spain/Europe risks have a bigger spill over effect into markets 
  • And of course the biggest risk of them all – the Fed does not hike on Jun 13… which would cause the mother of all expectations to be repriced…

Parameters

Entry:

97.6350

Stop:


97.90

Target:


97.34, yet as always with an option to close down the trade earlier

Time horizon:


Two to three weeks (14 days to potential June 13 Fed hike)

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