To The Moon

After holding the positions for more than two months, our long EUR and WTI crude oil trades both generated positive returns last week. With a Federal Reserve rate hike drawing near, new trade setups may emerge at any time.

Many investors still have questions about several key issues. This week, we will use the current market backdrop to review the main considerations and provide a practical framework.

Managing Futures Contract Rollovers

One of the most common questions concerns futures contract rollovers. Because we frequently run swing trades and some positions are held for relatively long periods, changes in the front-month or most-active contract are sometimes unavoidable.

Since physical delivery is generally not a practical option, the choices are usually limited to the following:

• Settle the contract financially.

• Close the existing lead-month contract and establish a new position in the next active contract.

The principal variable is the premium embedded in the new or more distant-dated contract. Commodity futures typically exhibit more substantial roll premiums. If the premium exceeds 2%, the trade should be reassessed.

Another option is to use the relevant spot-market instrument or an ETF. These alternatives may also involve varying degrees of tracking drag or roll-related erosion, but they can be more convenient. We discuss this approach further below.

For example, our previous EUR position was approaching a rollover into the next active contract. Had the position remained open, the rollover cost would have been approximately 30 points, which was still acceptable. However, if the premium had exceeded 50 points, the trade’s risk-reward profile would have warranted further review. $欧元主连 2612(EURmain)$

Futures or ETFs?

Another frequent question comes from readers and traders whose primary experience is in equities rather than futures: if they want to participate when an opportunity arises, what is the most suitable instrument?

For these investors, our preferred starting point is generally the relevant ETF. Whether the underlying market is a commodity or another futures-linked asset class, mainstream products usually have corresponding ETF vehicles.

ETFs typically track futures-price movements closely, meaning their trend behavior and market direction are often broadly aligned with the underlying futures contract. However, their price construction can differ materially. ETFs also do not trade around the clock, which creates gap risk. Under exceptional conditions, this can amplify the realized impact of stop-loss or take-profit levels. In most cases, however, the difference is relatively marginal.

Common examples of futures-linked instruments and their ETF counterparts include:

These are only selected examples. In practice, investors can generally identify a directly corresponding ETF through a simple search. $黄金主连 2612(GCmain)$ $黄金ETF-SPDR(GLD)$ $WTI原油主连 2610(CLmain)$ $美国原油ETF(USO)$ $欧元主连 2612(EURmain)$ $加元主连 2612(CADmain)$ $日元主连 2612(JPYmain)$ $SG人民币主连 2612(UCmain)$ $英镑主连 2612(GBPmain)$ $HK人民币主连 2612(CNHmain)$ $美元ETF-PowerShares DB(UUP)$ $做空美元指数-PowerShares(UDN)$ $CME比特币主连 2609(BTCmain)$ $比特币ETF-iShares(IBIT)$

It is important to note that futures offer more flexible effective leverage, while ETFs typically come with predefined exposure levels—such as 1x or 2x—and are separately structured for long and short exposure. Investors using ETFs should therefore select products in line with their own capital base and risk tolerance. In terms of capital efficiency, futures generally retain an advantage.$纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $NQ100指数主连 2609(NQmain)$ $微型NQ100指数主连 2609(MNQmain)$ $标普500ETF(SPY)$ $标普500(.SPX)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $标普500波动率指数(VIX)$ $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$ $道琼斯(.DJI)$

Risk Management Principles

Although futures differ from other instruments in certain respects, the core principles of risk management remain the same.

We recommend managing trades as a percentage of total portfolio capital:

• Limit the loss on a single trade to 3%–5% of total capital.

• Use this risk limit as the foundation for determining position size.

• Investors with smaller accounts may consider mini or micro futures contracts.

• Using ETFs to achieve a smaller and more manageable exposure can follow the same risk-management logic.

FOMC Outlook and This Week’s Strategy

Finally, let us briefly assess the risks surrounding this week’s FOMC decision. Based on current FedWatch pricing, the market is effectively expecting a 25-basis-point rate hike this week. In other words, the first hike has been brought forward significantly from the fourth quarter—or December—to September.

Most asset classes have already reflected part of this shift, though the move has not yet been fully priced in. Whether the market reverses on the day of the decision or the following day will be critical in determining the market’s direction over the next 30–45 days.

• If the market continues in a one-way move without reversing, it may indicate that a new trend is beginning to build beneath the surface.

• If a reversal occurs, the market may instead enter a broader and more prolonged range-trading phase.

• If the setup remains unclear, it may be preferable to wait for the market to provide greater clarity and then trade in the direction of the confirmed trend next week.

  

Current Trade Plan

EUR/USD

The long position initiated at 1.1420 was closed at 1.1570, generating an actual gain of +150 pips.

New long-entry limit orders have been placed:

• Buy limit at 1.1502 and 1.1442, with half of the intended position allocated to each level.

• Stop-loss: 1.1360.

• Target: 1.1800.

• The orders remain valid until cancelled.

Crude Oil

The long crude oil position, entered at an average price of 75, reached the first target of 95 last week. Half of the position has been closed to lock in profits.

The stop-loss has previously been moved to the entry level to protect the remaining position and preserve a no-loss outcome. From a trading-logic perspective, a stop below 74 may be more appropriate.

The next target is 115, at which point the remaining position will be closed.

Gold

No long or short setups were triggered in gold last week. The strategy has been adjusted slightly for this week.

Maintain the following sell-limit orders:

• Sell limit at 4,830 and 5,170, with half of the intended position allocated to each level.

• Stop-loss: 5,275.

• Target: 4,000.

Maintain the following buy-limit orders at lower levels:

• Buy limit at 4,265 and 4,130.

• Stop-loss: 3,960.

• Targets: 4,765 and 4,910.

Other opportunities may emerge on the day of the FOMC decision, but they will require flexible execution. We will make further selections next week based on the market’s final reaction.

P.S. Once a trade reaches its first target, the stop-loss will automatically be adjusted to the entry level. Any changes after an order is filled will be communicated in subsequent articles.