QCP Weekend Summary – 7 September 24

- US non-farm payrolls report for August came in lower-than-expected last night at 142K (est. 165K). Unemployment matched estimates at 4.2%, slightly down from the previous month’s 4.3%.

- ⁠The market’s initial response was positive sending risk assets on a rally. However, the bullish sentiment reversed sharply as the market started to price out 50 bps cut in Sep. Post-NFP the market was pricing in a 55% chance of a 50 bps cut. As of this morning, the market is pricing in a 70% chance of a 25bps cut and a 30% chance of a 50bps cut.

- Nvidia (NVDA) continued to sell off, weighing down on broader US equities indices and crypto prices. BTC traded to a low of $52,500 and is now finding support at $54,000 while ETH plummeted to $2,150.

- BTC spot ETFs also extended an 8-day outflow streak.

- Despite the overnight drop in crypto prices, the options market remained relatively calm. The desk even saw large put selling through the session. We are observing front-end vols drifting lower as spot consolidates into the weekend.

How should we navigate this?

In this period of heightened volatility where basis yield remains on the lower end of the range, a Fixed Coupon Convertible is an attractive product as it generates a strong and stable yield of up to 33% p.a.

Trade Idea
Conditional fixed Coupon Convertible (8-Nov 2024)
Earn weekly 33% p.a. coupons as long as BTC price is above 50,000
Strike: 45,000
Protection: 40,000
At expiry, only if BTC is below 40k, the USD deployed will be converted to BTC at 45k.