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Posted May 21, 2025 at 12:03 pm
Back to initial unemployment claims folks, I like the same trade as the last two weeks. Claims have stabilized with the last two reports printing at 229,000. But from a 4-week moving average perspective, they’ve been north of 220,000 for 12 consecutive weeks and economists expect tomorrow morning’s number to mark the 13th consecutive week above that threshold. The median estimate for tomorrow’s figure is 230,000, essentially unchanged from the prior two weeks.
I like a combination trade in consideration of the historical data and current economic conditions. While my estimate is at 235,000, I think there’s room for a notable move higher but not significantly lower. However, initial claims have not come in above 260,000 since October 2021.
A high-conviction idea for tomorrow is pairing the “Yes” answer at the 220,000 threshold for $0.72 and the “No” answer at 260,000 for $0.93, costing a total of $1.65 and delivering $2.00 back to the investor on a number as low as 221,000 or as high as 260,000. Furthermore, I think the risk-reward profiles of the “Yes” answers at the 180,000, 190,000, 200,000 and 210,000 thresholds that range from $0.97 to $0.87 in price are compelling. Finally, the “No” answers at 270,000, 280,000, 290,000 and 300,000 also look attractive, costing either $0.94 or $0.95 each.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of May 21, 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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