Jan 18, 2019. Finding middle ground

–This morning EDH9/EDH0 calendar spread is very nearly back to positive, having been as low as -27 at the start of January.  Both contracts are now around 9731. In the past couple of months this spread has gone from PLUS to MINUS 1/4% and is now gravitating to the center.  The market is back to a tenuous embrace of somewhat looser financial conditions and central banks that are no longer tugging on the rug of withdrawing liquidity.  Stocks revealed the underlying sentiment, quick to rally on talk that Chinese tariffs might be lifted.  Quarles yesterday laid out a base case of a solid domestic economy, but again alluded to overseas risks.  Interest rate futures are settling into a ‘not too hot, not too cold’ comfort zone, with low volatility.  However, continued enthusiasm in stocks could bring back fears of hikes.

–Large buying in front end Short Sterling call butterflies yesterday, June’19, Sept’19 and Dec’19 9900/9912/9925 c flies:  +60k June for 3.5, and at least 10k each Sept 2.75 and Dec 2.0.  Futures settlements were 9901, 9896, 9889.  Looking for the slow grind roll-up

Posted on January 18, 2019 at 5:16 am by alexmanzara · Permalink
In: Eurodollar Options

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