Upside
August 19, 2025
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–Early buying in Treasury calls appeared to be exits as open interest declined
FVU5 109.25c 2 paid 30k
TYU5 112.5c 2 paid 40k
–Later in the day, buyer on BLOCK, 95k SFRV5 9650c for 3.25. Market maker immediately bought 60k back on the box for 3.0, settled 3.25 vs 9619.5. A few people noted this trade as a likely buyback of the short strike of a call fly, however, open interest rose 95k (looks new). Need some pretty heroic assumptions for this strike to be in play as it expires Oct 10, 3.5% vs current FF target 4.25 to 4.5%. SFRZ5 underlying settled 9619.5 (3.805%)
–Back in 2019, when news of covid was just starting to come out of China, there was a consistent buyer of 25-50k call spreads on EDU20: 9875/9925cs and 9887.5/9937.5cs for around 4.0 At the time, EDU0 was around 9840, and the FF target was 1.5 to 1.75%. Of course, these call spreads paid as covid ran rampant.
–Now there’s a guy who has accumulated huge size in SFRU5 9612.5/9625cs 1.0 to 1.5; added small for 0.75 yesterday. And buyer +95k SFRV5 9650c for 3.25. Seems like someone who ‘knows something’ about the prospects of a 50 bp cut at the Sept FOMC. Beeks.
But maybe not. A couple of weeks ago there was a buyer of 60k SFRV5 9618.75/9643.75 cs for 4.5. These were substantially exited at 10 the other day… let’s just call it a profit of 5.5 * 60k or 330k bps. If just rolling into the 9650 then 3.25 * 95k is just under 309k bps. Simple roll? Also been a buyer of SFRZ5 9618.85/9643.75c 1×2, 1.25 settle. SFRV 9650c as cheap protective wing for trades similar to this?
–New high in 30y Gilt yesterday 5.61%. German 30y is same picture…pegged to new high yield of 3.34%. US rate trading was subdued; yields up about 1 bp across the curve, with tens at 4.335%, once again glued to the 4.33% Fed Effective rate. US 30y edging toward 5%, 4.938% yesterday.
–From @GlobalMktObserv:
The history of financial markets has NEVER seen this before: The S&P 500 Technology Sector Price-to-Sales ratio hit 10x, the highest EVER. Even at the 2000 Dot-Com Bubble peak, the ratio was ~7.8x. The median ex-tech P/S ratio is just 3x.
–From NY Fed’s Business Leaders Survey:
Business activity continued to decline in the region’s service sector in August, according to firms responding to the Federal Reserve Bank of New York’s Business Leaders Survey. The survey’s headline business activity index was little changed at -11.7. The business climate index remained negative at -39.3, suggesting the business climate remained worse than normal. Employment held steady, and wage growth was modest. Supply availability continued to worsen. The pace of input price increases remained moderate, and selling price increases remained significant. Firms turned pessimistic about the outlook.
