Hong Kong has emerged as fertile territory for our ForecastTrader participants following the recent IBKR launch of predictive contracts linked to the special administrative region (SAR). Just days after a directional trade costing $1.88 that addressed gross domestic product paid $2.00, the Consumer Price Index (CPI) release slated for May 22 is presenting what I believe is an even more compelling opportunity.
To that end, I like the “No” answer to the contract asking, “Will the year-over-year change in the Hong Kong Consumer Price Index exceed 1.8% in April 2025?,” which costs just $0.48. Consider the following factors that in my opinion make the contract appealing:
- The March CPI was only 1.4%, so a large increase, which is highly unlikely in my opinion, would be required for the “No” answer to be incorrect.
- The consensus estimate anticipates the CPI will remain unchanged at only 1.4%.
- My own economic model, furthermore, calls for a print of 1.5% due to the SAR experiencing higher import costs.
- Even after considering the impact of foreign products on the CPI, I believe it’s highly unlikely that the index will exceed the 1.8% threshold.
- In conclusion, I also like the risk-reward profiles at the 2.3%, 2.8% and 3.3% thresholds with “No” answers ranging from $0.90 to $0.96.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of May 20, 2025. Red circles around the thresholds were inserted by J. Torres to highlight his preferred “No” answers throughout different thresholds.
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Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
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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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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Disclosure: CFTC Regulation 1.71
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.
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