Rates And Volatility Snapshot
US Treasury yields climbed, with the 10-year near 4.10% after dipping below 4.00% on Sunday, the biggest two-day rise since April. CME FedWatch showed a 94% chance of no rate change at 3.50%–3.75% on 18–19 March, with fewer cuts priced for 2026. Friday’s NFP report is the next key release. Travel stocks fell further: UAL followed Monday’s 6% drop, while AAL and DAL extended declines after falls of over 5% on Monday. CCL sank nearly 12% on Monday, with RCL, NCLH, MAR, HLT, BKNG, and EXPE also lower. Target posted adjusted EPS of $2.44 versus $2.16, revenue of $30.45bn, and comparable sales down 2.5%, guiding EPS of $7.50–$8.50 and sales up 2%; shares rose about 3% premarket. Best Buy reported adjusted EPS of $2.61 versus $2.47, revenue of $13.81bn, comparable sales down 0.8%, raised its dividend 1%, guided FY27 revenue of $41.2–$42.1bn, and was up as much as 9% premarket. Gold futures opened at $5,205 after $5,312 on Monday; spot gold briefly hit $5,400, the Dollar Index rose nearly 1.7% over five days, silver rebounded nearly 2% after a 6% fall, LIT dropped 10%, and AMAT, LRCX, KLAC, and ASML fell over 6%. With the VIX surging above 25, option premiums are now expensive, reflecting the high level of fear in the market. We should consider this elevated volatility as the new normal for the next few weeks, making it prudent to purchase puts on broad market indices like the SPY and the hard-hit IWM for portfolio protection. Historically, geopolitical shocks like the onset of the Ukraine conflict in 2022 saw the VIX remain above 30 for over a month, suggesting this instability could persist. The closure of the Strait of Hormuz is the most critical factor, directly impacting a third of the world’s seaborne oil. We should look to buy call options on energy ETFs like XLE and individual producers to capitalize on crude prices that could easily top $100 per barrel if the strait remains closed. For context, we saw Brent crude jump from around $90 to over $120 in just two weeks in early 2022, a pattern that could repeat itself now.Positioning For The Next Wave
This oil shock dramatically changes the outlook for interest rates, as the market is now pricing in the Federal Reserve holding steady in March instead of cutting. The surge in energy costs will feed directly into inflation data, a key concern for the Fed, which historically prioritizes fighting inflation even over growth. We should anticipate continued upward pressure on Treasury yields, making bearish put options on bond ETFs like TLT a viable strategy ahead of Friday’s jobs report. The market has clearly split into winners and losers, a trend we can trade with sector-specific options. We see continued strength in defense stocks, making calls on the ITA ETF attractive as global tensions rise. Conversely, the airline industry is facing crippling fuel costs and travel disruptions, making puts on the JETS ETF a clear way to play the downside. The flight to safety is boosting the US Dollar, which in turn is creating pressure on other assets that performed well to start the year. We have seen this rotation away from high-growth momentum names like semiconductors and lithium miners, a trend that is likely to continue. Hedging tech exposure by buying puts on the QQQ is a wise move, as these stocks are particularly vulnerable when investors are de-risking their portfolios. Create your live VT Markets account and start trading now.
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