Jobs Friday Becomes Popular for Hedging, Speculating and Arbitrage: June 5, 2025

ForecastTrader Contacts regarding Jobs Friday have become some of the most popular instruments within the IBKR predictive market because they provide opportunities for hedging, speculation, arbitrage and interest-like cash flows associated with one of the most popular economic indicators. For this week, total open interest has climbed to just shy of 11,000 contracts that focus on this Friday’s nonfarm payrolls.

With IBKR ForecastTrader contracts, investors purchase “Yes” and “No” answers to questions addressing the potential outcomes of a wide variety of political events, environmental measures and economic indicators. For example, a contract for this Friday’s release asks, “Will the increase in US Payroll Employment exceed 144,000 in May 2025.”  Market participants that choose the correct answer receive a dollar for each instrument they purchase, with the price determined by the likelihood of the “Yes” or “No” being correct. In the example below, the “Yes” is priced at $0.36, implying that investors believe the response has a 36% chance of being correct.

Investors can choose from different thresholds. In this case, the range starts with a loss of 106,000 jobs. At the top of the range is the addition of 394,000 jobs.

The following factors explain why Jobs Friday has become an attractive choice within the predictive market:

• The labor market is a key metric for understanding the economy, including consumption, productivity, business sentiment and monetary policy. As a high-profile indicator, it is understandable that investors would be attracted to engaging with nonfarm payrolls in our prediction market.
• IBKR ForecastTrader Contract returns don’t require participants to accurately anticipate how markets will respond to labor data. For example, a hotter-than-expected report can boost investor sentiment if markets believe that the economy is at risk of contracting, but if inflation fears are prevalent, it can damage optimism by pointing to a potential increase in price pressures and a higher likelihood of the Federal Reserve raising short-term borrowing costs. In contrast, ForecastTrader Contracts pay investors with the correct answer $1 regardless of how markets react to economic releases.
• Portfolio managers that are nervous about a hot or cool number can purchase “Yes” or “No” answers associated with nonfarm payrolls as a hedge. Meanwhile, speculators and forecasters that have a hunch on where the number will land can position with “Yes” and “No” answers across different thresholds to express their views. And arbitragers can look at different markets that sport distinct probabilities and possibly benefit from the discrepancies.
• ForecastTrader contracts also provide interest-like incentive coupons that are calculated based on the values of the “Yes” or “No” answers held by investors and currently annualize at 3.83%. This means if the contract increases in value, the interest-like incentive coupons will increase, but if the instrument declines in value, so, too, will the cash flows.  

Trade Of the Day

In light of softening labor market conditions in Canada, economists expect the unemployment rate to rise from 6.9% to 7% in tomorrow’s print which covers May. Against this backdrop I like buying the “Yes” answer at the 6.7% threshold for $0.86 since I think it’s extremely unlikely that the joblessness indicator will drop by 0.2%.

US Unemployment Expected to Remain Unchanged

We also have the US unemployment rate on deck and our odds are near the consensus estimate of 4.2%. Indeed, our prediction market sports a 58% probability that the rate will come in at 4.2% or below for the month of May. There’s a 40% chance, however, of a march above the 4.2% level.

Source for Images: ForecastEx

Note: Prices are highest bids as of the morning of June 5, 2025. The interest-like incentive coupon that currently annualize at 3.83% is subject to proportionate changes with the fed funds rate.

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