Archive for the ‘Eurodollar Options’ Category
August 14. In crypto-currencies we trust
–Markets have rebounded, having made it through the weekend without major surprises regarding N Korea. Stocks rallied, bonds are lower, as is gold. However, bitcoin has exploded to a new high above 4000. The dollar has also firmed, though a headline in today’s WSJ says ‘USD weakness could be boost the economy needs.’ While Trump […]
August 13. Limit to the Level of Skirmishes
The violence that erupted at the ‘Unite the Right’ rally in Charlottesville is a demonstration of how growing tensions can spin out of control in a hurry. In the global arena, Trump now is threatening trade retaliation against China in an attempt to force Xi’s hand on North Korea. At the same time, China is […]
Aug 11. First out the door….
–Yields fell as stocks sold off on N Korea worries. SPX -1.45%, Nasdaq -2.1% and ten year yield -3 bps to 221. While VIX leapt to 16 late in the day, treasury vol was subdued, with TYZ7 126 straddle closing 2’16 or 4.15%. Green and blue midcurve straddles were mostly up 0.5 tick. August midcurves […]
Aug 12. VIX vs TY Vol
Last time VIX was above 15% in May, TY Vol was 4.67. Today, TYZ 126 straddle settled 2’15 or 4.15 vol. If it were 4.7, then the straddle would have settled 2’34.
Aug 9. Trump intent on destroying the rally he takes credit for
–As stocks made new highs early in the day, a number of bearish interest rate option trades went through: 0EZ 9812/9800ps 3.0 paid for 25k, adding to Monday’s buys. There were also two block trade risk/reversals on 0EU and 2EU, buying puts on both in size of 20k: 0EU 9825p/9837c, sold call for 1 over […]
Aug 8. Slight shift in Junk
–Net changes in interest rates were small yesterday, with yields edging lower and a bias towards flattening. The action can be summarized by a couple of trades: Buyer of 60k 0EZ 9812/9800 put spread for 3.25 (settled 3.0 ref 9825.5 in EDZ8). The underlying Dec’18 contract had the largest open interest change on the strip, […]
It’s Never the Trade, It’s Always the Size
The title is one of the favorite sayings of a friend of mine (WHM). Obviously, a bad trade of small size can be absorbed. But a large trade coupled with a sudden evaporation of liquidity can be a disaster. Especially when there’s leverage involved. On Thursday, the TY straddle expiring on unemployment day traded a new low 21/64’s. On […]
August 4. Duration wanted
–Payrolls expected 180k and avg hourly earnings 0.3%, with a rate of 4.3. Yields fell once again yesterday as vol and the USD declined. Late in the day $/yen was below 110 having been as high as 114.50 in mid July and mid May. Once again there was early large buying of WN and TY. […]
August 3. When in doubt….sell vol
–Vol was hammered in treasuries as yields slipped and the curve flattened slightly. Tens -1.2 bp to 225. The drop in premium was especially notable in USU, where the 154 straddle opened the day trading 2’32 and closed at 2’22, taking implied from 8.2 to 7.6. The fall in vol is somewhat directional with the […]
Aug 2. Yields ease
–Yields dropped yesterday, in part due to weak auto sales, with 10s down 4.1 bps to 225. Many euro$ calendar spreads made new lows, for example EDZ7/EDZ8 closed at 27.0, -1.5 on the day. Red/green ED pack spread closed at exactly 20, -1.875. EDH8/EDM8 settled 5.5, lowest since last November. FFF8/FFF9 settled 23.5, less than […]
