QCP Weekend Summary - 28 Sep 24

This week, the market experienced a significant rally in risk assets, primarily driven by the PBoC's stimulus aimed at revitalizing the Chinese economy. This followed the Fed's announcement of a 50bps rate cut, which has set a positive tone for global markets.

In Japan, political developments have also shifted market sentiment. Ishiba, a vocal critic of the BoJ's ultra-loose monetary policies, is poised to become the new PM. This has shifted market expectations away from BoJ's low interest rate stance, adding another layer of complexity to the financial landscape.

The Core PCE index, the Fed's preferred inflation gauge, reported a softer-than-expected increase of 2.6% YoY (forecasted 2.7% YoY). This has increased the market's anticipation of a potential 50bps cut at the next FOMC meeting, with probabilities now at 53% for 50bps versus 47% for 25bps. Following this data, the DOW closed at a record high, climbing 137.89 points.

As we head into next week, the key focus will be on upcoming labour market indicators, including JOLTs, ADP, and the U.S unemployment rate. Strong performance in these metrics could bolster the case for a 50bps cut in November, further propelling risk assets.

On the crypto front, BTC ETF saw substantial inflows throughout the week, closing Friday with $494.4m inflows. Despite lacklustre flows into ETH ETF as of late, we observed ETH ETF picking up and closing Friday with $58.7m inflows. BTC has reclaimed the 66k mark, while ETH is trading around 2.7k. Implied volatility for ETH remains elevated (by 8%) compared to BTC, while ETH/BTC remains steady above the 0.04 mark.

Trade Idea

While the stars are aligned for risk assets to rally heading into Q4, we favor topside structures that offer high payouts as we remain bullish heading into the next quarter.

Election Ticket

Expiry: 8 Nov 24
Sell 1x BTC 64k Put
Buy 18x BTC 70k/72k/74k Call Fly
Cost: Zero
Max Return: 488.8% p.a. or $36,000 USD per BTC if spot expires AT 72k
Downside: At expiry, if spot is below 64,000, you buy BTC at 64,000