Jan 20. Tough start to the year
…it is written that misfortune knoweth not the hour to cease.
http://www.telegraph.co.uk/finance/financetopics/davos/12108569/World-faces-wave-of-epic-debt-defaults-fears-central-bank-veteran.html
“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something” William White OECD
–Here we are again sub 2% in US tens as March Crude is below $29 bbl and ESH is revisiting August lows. The quote above is from William White of the OECD who ultimately recommends fiscal investment from governments as the best policy response.
–Yesterday could well have been a record in terms of euro$ option trading. On the upside 50k Blue April 9850/9875 c strips were bought from 10.5 to 12. Almost everything else was downside, including a large buy of EDM6 9912/9887p sprd with 9900p in size of at least 40k. June put open interest rose by 194k to a total 3.9m. Vol jolted higher across the curve. EDM6 9925 straddle surged from 18 settle Friday to 20 yesterday. The EDU 9912.5 straddle went from 26.5 to 28.0. Also huge buying of EDU6 9900/9925 strangle for 17 (call side was exit). There was a sale of over 100k EDU6 9937/9950cs at 2.0, 2.75s. Other notable trades below.
–We are now just a week away from the Jan FOMC, which does not include a press conference (thankfully). Carney was dovish yesterday, and the Fed will likely signal paralysis by citing international stress, and might even finally note that market based measures of inflation expectations are IMPLODING. No more hikes for you.
–Speculation is now growing for another devaluation by China. The initial surprise was in August, which shook global stocks. But now stocks are already at August lows, so a further downside push seems quite plausible.
–Other large ED plays, buyer of 2EM 9825/9775ps 9.5 paid 50k covered 9850.
2EU 9825/9787ps 11.5 paid 30k covered 9842. 100 calls bought again, in EDZ6 for 0.5 and EDM7 for 1.5.
