We have several economic indicator forecast contracts expiring tomorrow, including building permits, housing starts, initial unemployment claims and a Federal Reserve interest rate decision. Below, I share trades that I believe have favorable risk-reward profiles.
Combo For Permits
It’s highly unlikely that building permits will exceed 1.5 million seasonally adjusted annualized units (SAAU) in tomorrow’s print covering May. The construction sector has been sluggish, as 7-handle mortgages and weak builder sentiment weigh on activity. Meanwhile, the indicator has only jumped above the 1.5 million level once in the past 14 months. Similarly, it’s almost impossible that permits won’t arrive north of 1.35 million, a figure that has been exceeded every month since June 2020, when construction plans were halted due to stay-at-home orders during the COVID-19 pandemic. In light of these dynamics, I like a combination order here of buying the “Yes” answer at 1.35 million and the “No” at 1.50 million, which each cost $0.91 for a total of $1.82. The combination trade delivers $2.00 back to the investor on a number as low as 1.351 million or as high as 1.50 million.
“Team No” On Starts
Similarly, housing starts have only exceeded 1.5 million SAAU once in the past 16 months and current heavy rates of financing and sour homebuilder sentiment aren’t supportive of a huge beat in tomorrow’s print, which is expected to come in at 1.36 million. I’m avoiding lower thresholds here, however, because I do see the potential for a significant miss and am not comfortable with the “Yes” answer at the 1.30 million level priced at $0.80. I like the “Nos” at 1.5 million and 1.6 million, which each cost $0.96.
“No” at 260K for Claims
Jobless claims are expected to decline to 245,000 in tomorrow’s print, but a sizeable downside miss is in the cards. In the past 12 months, the indicator has tended to plunge following a climb above 240,000, as you can see in the chart below. Meanwhile, initial filings haven’t exceeded 260,000 in almost 4 years, going back to October 2021. For that reason I like the “No” answer at 260,000 which is priced at $0.90, but I’m avoiding the “Yes” at 230,000 because I think it’s possible that the gauge heads back closer to 220,000. Finally, since claims have started trending north, the 210,000 and 220,000 thresholds have neared $1.00 amidst bidless “Nos” at times, incrementally becoming out of play for investors.
Fed Expected to Pause
There’s limited action in forecast contracts for the Fed rate decision tomorrow because the central bank is widely expected to leave its key benchmark unchanged. The “Yes” is going for $0.97 but there’s no bid on the other side. Investors may place “Yes” orders at $0.97, $0.98 or $0.99 and wait for potential fills.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of June 17, 2025.
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This material is from IBKR Macroeconomics, an affiliate of Interactive Brokers LLC, and is being posted with its permission. The views expressed in this material are solely those of the author and/or IBKR Macroeconomics and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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