A few option plays. Israel set to attack Iran?
May 21, 2025
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–The Philly Fed Services survey showed no bounce, coming in at -41.9 from -42.7 (Near covid lows). The last couple of days there’s been pressure on SFRZ5/Z6 1-yr calendar thru options, and yesterday it was similar, but thru calls. Z5/Z6 settled -47.0 (9619.5/9666.5), a new recent low. SFRU5/U6 is -73.0 so that’s a quarter percent roll over 3 months.
(On Monday, a synthetic Z5/Z6 roll-down trade: +Z5 9600/9562ps vs -0QZ 9626/9587ps paying 3.5 to 3.75 for Z5. Flattener (works with roll of curve) 23k traded. Yesterday a similar idea, but Dec’25/Dec’27: -8k SFRZ5 9650c (16,75s vs 9619.5) vs +8k 2QZ5 9675c (23.0s vs 9648) paid 5.0 to 5.25 for green. Works best if back end rallies due to stubbornly idle Fed in the face of deteriorating economy).
–New Buyer of 40k SFRM5 9725c for 0.25. News that Israel may attack Iran caused CLN5 to test April’s high. Last print +0.80 at 62.83.
–Buyer of 45k SFRZ5 9537.5/9487.5p 1×2 for zero. Current policy has EFFR 4.33% or 9567, right where SFRK5 and M5 have gravitated. This one looks for hikes going into year end. Crazy? Maybe not. No premium outlay…
–No real news. 20y auction. Curve a bit steeper yesterday with 2s down 1.1 bp to 3.968 while bonds rose 3.2 to 4.967%
–From Business of Fashion:
Chanel Pulls Back on Price Hikes as Sales Fall 4%
