Jan 24. “Why, he stubbed his toe!”

“Well, that doesn’t make any sense. A man could stub his toe, take poison, fall down a well, break his neck, and crack his head open so that his brains fell out. Then someone would come along and ask what killed him, and some numbskull would say, “Why, he stubbed his TOE. What would be the sense in that? NO. There’s no sense in this either. Is it contagious?”  Mark Twain from Huckleberry Finn

–It’s all about Argentina now…well not Argentina so much as all emerging markets and possible contagion.  Argentina of course, devalued yesterday.  S Afr Rand made new low, as did Turkish Lira, Mex Peso, and Aussie at new lows this morning.  There are still concerns about possible fund default in China and tight money going into the end of the year. Etc.  So there’s a confluence of events which wasn’t having much of an effect, until someone came in to aggressively buy 50k+ TYH 125c from 26 up to 32.  I had thought it was covering, but maybe a cover and flip to long, a specialty of my first bond account Angelo F. In any case, that trade seemed to crystallize the idea of gathering risks as ten yr yield fell 8bps to 277 and green eurodollar pack, which had been the leader to the downside, exploded to +16 before settling +14.625. Implied vol in treasuries rose on the move, which is telling you something…
–2/10 at new low, though I marked with w/i 2 yr.  But peak one-yr eurodollar calendar is now only 109.5 (EDZ15/16) which was down 2 on the day.  And the red/green/blue pack butterfly which had exploded to +7 first thing in the morning came back to settle -1.75 as greens, well, shooted.  Possibility of suspended taper due to EM concerns?  FOMC meeting next week.
–Of course the smart, safe, money can go into AMZN, which did grudingly fall 1% yesterday after having rallied 50% since May, sporting a p/e of 1428 (no decimal), while Walmart has 1/100th of the p/e at 14.36 and a yield almost as high as the ten year note.

Posted on January 24, 2014 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

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