Dec 12. If only there were some clues

–Highlighting a few disaster trades from yesterday:  EDZ19 9850/9900cs 0.5 paid for 11k and EDZ20 9850/9900cs 4.0 paid for 30k, both new positions.  Continued buying of 3EU 9800c, yesterday at a price of 6, but only 1500 trade (now near 240k open).  These appear to be disaster trades, anticipating economic malaise or worse, with an eventual return to Japan-style QE, and rates hovering near zero.  It’s not difficult to identify omens that could lead to such a scenario.  GE, once the largest market cap stock, continues to slide toward zero.  European bank shares won’t get off the mat, for example, Credit Suisse is down nearly 50% from the high of the year made in February.  The British Pound is sinking as May’s future faces a cold December.  An article on Bloomberg cites Moody’s Analytics research which shows that in China, “a measure of expected default frequency has risen above early warning levels for about 25% of corporate borrowers”  “…This share has been rising steadily for the past two years and now sits near the highs last seen in 2005.”https://www.bloomberg.com/news/articles/2018-12-12/china-default-risk-jumps-to-2005-high-says-moody-s-analytics?srnd=premium–In short, there’s no shortage of market signals that might be construed as warning flags, and while the global political circus has an entertaining side (and it’s here that the US remains an undisputed leader), it also brings about a sense of growing unease.  However, they’re not scrambling to buy gold, bitcoin is no longer being used as a crypto flight to quality, and treasuries are capped by an endless supply with the prospect of another government shutdown looming next year.  So we’re left with the sort of lame, long time-frame euro$ call spread trade.  Let’s start the Santa Claus rally. 

Posted on December 12, 2018 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

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