Pro Macro: Flash Update – June 21, 2022

Published on: June 21st, 2022

A seminal week in policy circles and risk assets moved lower. A review of the week’s events and an action plan including adjustments to trailing stops as well as things to watch and trade.

Comments

  • JM
    John M.
    21 June 2022 @ 21:08
    I don't have experience with ED so please excuse the noob question - but what is the point of buying EDZ3 with a 1.3% upside? Seems like there are easier ways to get this return?
    • HM
      Harry M. | Real Vision
      24 June 2022 @ 16:51
      Yes GE is the IB code for the EDs.
    • JM
      John M.
      23 June 2022 @ 17:43
      Got it, thanks. It is indeed under GE on IBKR if anyone is interested, not sure how I didn't find that before. Time to back up the truck on this one :)
    • SC
      Sean C.
      21 June 2022 @ 22:16
      In my reply GE and ED are the same thing, different codes for Eurodollars on different systems. Sorry for confusion.
    • SC
      Sean C.
      21 June 2022 @ 21:48
      Eurodollar Futures (based upon the London (hence why its called Euro) Inter-bank USD 90day loan rate and not the USD-Euro exchange rate) have a price equal to 100 minus the interest rate. So with EDZ3 at 96.3 that implies an interest rate of 3.7% and a target price of 97.50 implies and interest rate of 2.5%. Hence Julian is looking for a 1.2% decrease in rates. The GE contract is $2500 per 1% so a 1.2% move in rates would be $3000/contract. With a stop of 95.95 (implying an interest rate of 4.05%) you are risking $875 while trying to make $3000 so a 3.4 : 1 reward to risk. https://www.cmegroup.com/markets/interest-rates/stirs/eurodollar.html Note: The LIBOR index that the Eurodollar futures contract is going away and liquidity is gradually moving away from Eurodollars (GE) to the Three-Month SOFR (SR3) contract.
  • JA
    Jesse A.
    22 June 2022 @ 02:54
    I don't see EDZ on my brokerage (Ameritrade), I see GE which is eurodollar futures, so is that just the opposite?
    • SC
      Sean C.
      22 June 2022 @ 15:26
      ED and GE are the same thing. ED is the CME Clearing Symbol. GE is the CME Globex Trading Symbol. Different vendors use it differently. https://www.cmegroup.com/markets/interest-rates/stirs/eurodollar.contractSpecs.html
  • JM
    Jake M.
    23 June 2022 @ 12:59
    Julian, why do you think 3-4% is the max rate for this cycle? Why it can't go higher? Quantifiably what caps the FED's ability to raise only to 3-4%?
    • HM
      Harry M. | Real Vision
      24 June 2022 @ 16:51
      It can go higher. But it will need inflation to prove that a recession wont tame inflation. We are entering a phase in which the incipient recession may allow people to ignore the continued inflation and just assume that inflation will come off the boil. Plus JB is keenly aware that QT is about to kick in. Of course the proof of the pudding is in the eating. So if JB is right, EDs should rally. Stops are our friends.
  • rm
    roland m.
    28 June 2022 @ 21:13
    As the SPX short was stopped out, would Julian re-enter on the way down now?