This Tuesday’s June Consumer Price Index (CPI) is expected to reflect annualized advances of 2.7% and 3% across the overall and core segments. Both versions have subdued deviation rates, meaning that they tend to arrive near economist projections. Meanwhile the “Yes” answer at the 2.8% threshold for the core CPI appears undervalued to me at just $0.72. The odds of a 0.2% downside miss are quite low at this juncture and that’s what’s required for “Team Yes” to lose. The probability of a 2.8% figure is closer to 5% based on my forecast of 3%. Moreover, following three consecutive months of 2.8% readings, goods cost pressures are anticipated to drive yearly numbers north in tomorrow morning’s print and that’s another justification for a “Yes” trade here. Furthermore, I also like the risk-reward profile of the 2.7% level at $0.95.
Short Strangle Kind of CPI Forecast Trade
Turning to the headline figure, it is expected to be 2.7%. The 2.4% and 2.8% thresholds look attractive for a short strangle kind of trade, considering you would need a 0.3% downside miss or a 0.2% northward beat for the corresponding “Yes” and “No” answers to lose at the lower and upper thresholds. Indeed, I like the risk-reward profiles of the “Yes” at 2.4% and “No” at 2.8%, which cost $0.93 and $0.96 each for a total of $1.89. The combination delivers $2.00 back on a number as low as 2.5% or as high as 2.8% and the max loss of the trade is $0.89.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of July 14, 2025. Red circle around the thresholds was inserted by J. Torres to highlight his preferred “Yes” answers throughout different levels.
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