Leverage works BOTH ways
October 17, 2025
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–I had mentioned the other day that the first red SOFR contract rallied over 200 bps during the regional banking crisis of March 2023 (which ultimately culminated with the SVB bankruptcy). It was an extremely volatile period, (chart attached) but the key point was that the high was over 9700. Same type of price action for Liberation Day, first red went from 9650 to 9725. Currently first red is 9715 (SFRZ5), but FF are 25 lower than they were in April. Suddenly the buys of otm red calls (0QZ 9800c for 1.0) look pretty good.
–Headlines seem to be focused on regional bank stress again, (Zions, Western Alliance) because apparently, charlatan borrowers have pledged the same collateral for more than one loan. And… it’s gone. It’s worth mention that crypto is also under a cloud. I don’t watch much in this space but bitcoin (as of this early Friday note) is through last Saturday’s low, which is 17% off the month’s (all-time) high. Last price <105k. MSTR also at a new low, down 38% from the July high. Diamond hands, meet Dimon warning.
–Yields fell yesterday, with 10s down 7 bps to 3.975. This morning 3.955. I’m looking for 3.79. The late September covered call buyer, 113, 113.5, 114c in total size about 375k appears to be rolling longs into the 115 and 115.5 strikes. Yesterday -42k TYZ 114/115.5cs at 24 covered 113-21, 26d. TYZ 115.5c rose 39k in open interest to 82k, settled 17. I roughly calculate 115.5 strike to be 3.80% or slightly lower.
–Yesterday Optiver made a note of TY skew / demand for calls. Currently, with TYZ 113-29+, the 112.5p is 14/15 (-21d) while the 115.5c is 19/20 (+24d)
–It’s not all driven by financial markets (though a meltdown will surely trickle through to consumer spending… like a tsunami). The clip below was on Dave Lutz’ note from Jones Trading:
Shut out of full-time work, many jobseekers appear to be doing the next best thing and hunting for a holiday season gig, according to research from the job search platform Indeed. Searches for seasonal jobs were up 27% at the end of September compared to a year ago, and surged 50% from 2023, according to Indeed. The outsize demand from jobseekers compares with only a modest 2.7% pickup in seasonal job postings from employers, suggesting even temporary holiday roles will be hard to come by.
