March 6. Equities weak….

. Stocks are decidedly weaker this morning with SPH -11 at 1353.50. Thursday’s deadline for private participation agreement to the Greek debt cramdown is looming. A disorderly default remains a possibility. It seems to me that uncertainty is not really being reflected in option pricing. VIX was up only slightly yesterday to 18. Treasury vol had a modestly firmer tone. The front end of the eurodollar curve gave back a few bps of the recent rally, and there are still some put buyers on EDM2; April 9937/9925ps bought for 0.5 10k yesterday. If the Greek deal is in jeopardy a good way to play it is with long outright puts on EDM. There are now constant news stories about revamping the system for setting LIBOR, and the european banking complex would likely be seriously compromised if the Greek default gets ugly. EDM 9925p are only 1.5/1.75. I’m not making any recommendations here, but I will say that I bought some for myself.
–Headline from the Financial Times: Scramble to sell US debt as yields hit record lows / Busiest day of issuance this year.
–In local news the G8 summit in May was moved from Chicago to Camp David, as Obama said he wanted a more “intimate” setting. I don’t know what could be more intimate than a confrontation between Chicago Police and protesters. “I suggest you use your nightstick, officer.” (as Billy Ray Valentine says in Trading Places).

Posted on March 6, 2012 at 8:03 am by alexmanzara · Permalink
In: Eurodollar Options

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