Jan 23, 2018. Snow Job

–Hey here’s an idea, let’s buy some puts!  Massive put spread buying yesterday in euro$’s, which was the equivalent of at least -80k futures, mostly in reds.  Below I detail some of the trades, but the rise in futures open interest tells the story:  Total ED open interest +75k.  In reds (where almost all downside took place), +87k.  EDH9 +24k, EDM9 +25k, EDU9 +13k, EDZ9 +25k.  Unsurprisingly, yields pushed to new highs, with tens +2.4 to 266.3.  All near one-year euro$ calendars again made new highs, with EDH18/EDH19 +2.5 on the day to 56.5.  Large buying in EDH8 appears to have been short cover, with OI -16k.  Reds to greens edged up 0.75 bp to 15.25.

–Inescapable analogy:  Davos has been hit with huge amounts of snow and is under avalanche alerts.  Helicopters have been deployed to start controlled avalanches to lessen the instability, but only 2 of 10 efforts were successful.  It’s that last flake of snow that starts the slide.  What if the edifice of global wealth, embodied by the elite Davos attendants at the World Economic Forum, all comes crashing down?  ZH reports that 1% made 82% of global wealth last year.  The Central Bankers are trying to engineer a controlled retreat from helicopter stimulus, but the snow keeps falling…

https://www.bloomberg.com/news/articles/2018-01-22/davos-disrupted-as-executives-gather-amid-snowiest-ever-meeting

The town, where Donald Trump makes his debut later this week, was put on the second-highest avalanche warning level by the Davos-based Institute for Snow and Avalanche Research.

–“Gotta hunch, bet a bunch!”  Here’s a representative chart of market mentality, embodied by, well, a casino stock (WYNN).  Put it all on black.

–In my weekend piece I suggested conditions were in place for turnaround Tuesday.  Not a change in bearish sentiment, but perhaps a retracing pause. The big guns placed their bets yesterday in ED options.  Two year auction today, late yesterday the w/i was 2.09%.  Pretty juicy parking spot.

–Yesterday:

+170k EDH9 9725/9737ps vs 9800c for 0.5.  PS settled 4.75, 12d and call 4.0, 17d vs 9758.5

+60k 0EM 9725/9737ps with 2EM 9700/9712ps. 0EM settled 3.25, 14d and 2EM 2.75 10d   vs 9750.5 and 9734

+17.5k 0EZ 9712/9750ps vs 9775c.  PS settled 16.5, 30d and call 7.0, 23d  vs 9738.0

with

+17.5k EDZ9 9712/9750ps vs 9775c. PS settled 17.75, 23d and call 12.0, 29d (short and red dec pkg over 100 delta total)

+40k 2EJ 9712/9700ps settled 2.0.

Posted on January 23, 2018 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply