At the beginning of each week, Chief Strategist Sosnick and I huddle up to choose the Forecast Contract that we think offers the best risk-reward profile. We then publish the weekly pick on social media via LinkedIn and Twitter prior to its expiration which would be no later than the closest Friday.
Thursday’s retail sales report is top of mind, sporting a median estimate of 0% for April following a significant 1.5% gain in March. The strong performance in March was largely due to consumers frontrunning President Trump’s liberation day tariffs. Meanwhile, I’m expecting a modest beat of 0.1%. In consideration of household spending dynamics as well as the consensus, the “No” answer asking if the retail sales growth rate will exceed 0.5% for $0.62 appears significantly undervalued. Indeed, a beat as high as 0.5%, in light of the 0% projection, would still deliver $1.00 back to the investor on a trade currently priced at $0.62.
Combination Trade
A combination trade that I like regarding retail sales involves buying the “Yes” answers at the -1.5% and -1% thresholds for $0.94 each and the “No” answers at 0.5%, 1%, 1.5% and 2% for $0.62, $0.77, $0.87 and $0.91. The combination costs a total of $5.05 and delivers $6.00 back to the investor on a figure as low as -0.9% or as high as 0.5%. Finally, this trade offers a wide buffer to the investor in the case of a sizeable miss or a substantial beat.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of May 13, 2025. Red circles around the thresholds were inserted by J. Torres to highlight his preferred “Yes” and “No” answers throughout different thresholds.
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Displayed outcome information is based on current market sentiment from ForecastEx LLC, an affiliate of IB LLC. Current market sentiment for contracts may be viewed at ForecastEx at https://forecasttrader.interactivebrokers.com/en/home.php. Note: Real-time market sentiment updates are only active during exchange open trading hours. Updates to current market sentiment for overnight activity will be reflected at the open on the next trading day. This information is not intended by IBKR as an opinion or likelihood of a potential outcome.
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This is commentary on economic, political and/or market conditions within the meaning of CFTC Regulation 1.71, and is not meant provide sufficient information upon which to base a decision to enter into a derivatives transaction.
How much of my portfolio should I be investing in ForecastEx contracts guys? I’ve been all through the “IBKR Campus Financial Education” pages and I can’t find any advice on that. Maybe that will e their next webinar.
IBKR does not provide investment advice.