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Futures Measures

Trading Dollar, Rates, and Stocks

Futures Measures

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The US dollar is at a two year high at the moment while interest rates have been on the downtrend.

This leads us to ask, does this dollar move further confuse the recent weirdness in correlation in the stock and bond markets?

Correlation wise, there is no relationship between the dollar and stocks, or the dollar and bonds. This leads us to explore an uncorrelated trade opportunity. With euros having the strongest negative correlation with the dollar, we look to add some long deltas in there. Unfortunately, implied volatility is very low in that market at the moment.

Pounds on the other hand, are rich in premium, since IV is higher, and its correlation to the dollar is weaker.

In summary, we would look for long premium spread trades in the euro because of its low IV and short premium trades in the pound because of its high IV.

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