Glitch in the system

April 24, 2020

–Front June WTI rebounded 2.72 by settlement to close 16.50.  Jan’21 contract settled 29.36 which was down 0.41.  With regard to CLK expiration debacle, a friend mentioned to me that retail longs on one of the popular internet broker platforms were not able to exit because the system would not allow order entry of a negative price.  (Call the “help” desk.  Put on hold with elevator music.  Throw phone at wall. “Sir are you there?  It seems to be a problem with YOUR device.”)  

–Rates were quiet with yields mostly down around 1 bp.  Tens at 61.3 bps, -0.4.  The three-month libor setting finally dropped below 1% yesterday at 0.99138.  As a reminder, that’s above every rate on the eurodollar curve until the Dec’2026 contract which settled 98.98.  It’s above everything on the treasury curve except the long bond which I marked at 1.203%.  Still, the steady drop in libor is supporting the front end of the curve where EDM0 closed +1.5 at 99.555 or 44.5 bps.  New recent highs in EDM0/EDU0 calendar at -9.5 and in EDU0/EDZ0 at +1.5.  

–There was a large buyer of EDM0 9912/9900p 2×1 at prices of 1.25 and 0.5, two of the higher strike.  Exit trade, open interest dropped nearly 100k in the 9912p.  Vol generally continues to slip.  May treasury options expire today.  At yesterday’s close TYK0 139 straddle settled 21 vs 139-005. June settled 1’41.  Not looking for much activity today, though Durables and Capital Goods Orders are coming out with expectations of large declines from 7 to 14 pct.  Perhaps of more interest will be Michigan inflation expectations.  The 1 year was 2.1% last and 5 year 2.5%. 

–Stocks slipped yesterday on news that Gilead’s drug may not be the magic bullet.  Chopping around now and slightly positive as of this writing.

Posted on April 24, 2020 at 5:14 am by alexmanzara · Permalink
In: Eurodollar Options

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