Pricing a quiet 2020?

December 16 2019

–EDZ9 expires today and has been stable around 98.105, despite all of the repo angst.  1.5 million futures in open interest, with 11.4 million options on the contract.  Dec midcurves expired Friday, eliminating 2.7 million calls and 3.07 million puts.  

–Friday featured a strong rebound in rate futures despite the Phase One agreement.  Ten year yield fell 8.5 bps to 1.82%.  Red pack +8.25, greens and blues strongest at +9.5. Implied vol continues to soften going into a quiet week.  Today features Empire State Mfg, expected 4 from 5, and Markit PMI data, expected to show slight improvement.  Stock index futures made all time highs, but interestingly, so did the CBOE Skew Index which closed 144.51. https://www.cnn.com/2019/12/15/investing/stocks-week-ahead/index.html  

–So stock index puts are pricey vs calls, but they’re giving away euro$ puts.  EDZ0 atm straddle settled 38.5 with a year to go.  In the beginning of August, with just a little over 4 months until expiry, the EDZ9 atm straddle was 33.5.  In the words of Elvis Costello, ‘Accidents will happen, we only hit and run…’

–Jan20/Jan21 FF spread settled -25 and the EDH0/EDH1 calendar is nearly the same at -24.0.  The market has one ease priced through the coming year…but is currently pricing for boredom.  For libor/ois spread proxy is EDH0 vs FFJ0 which settled at 20.5 bps.

Posted on December 16, 2019 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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