Oct 28. FOMC today

–I received this text from a friend in the ED option pit yesterday: “At 1:01 tomorrow there will be a huge exchange of funds between the pit and the short put buyer.”
–At 1:00 PM Chicago time the Fed announces its interest rate statement.  Yesterday, Short Dec (0EZ) 9900 puts were bought in size of 100k (actually over 200k traded) and open interest increased 88k.  (ref 9913.5/9914).  There has been sizable put buying apart from today’s 0EZ  puts, including 100k 0EZ 9887p for 1.5 and over 50k EDF 9950p for 5-6 in the past few sessions.
–Could the Fed possibly hike today?  It would most certainly jolt the markets, and create a more circumspect “investing class” going forward, but the odds are miniscule.  US data continues to come out on the soft side, as evidenced by yesterday’s Durables data which included large downside revisions to the previous month.  In another sign of increased global CB accommodation, Sweden’s Riksbank expanded its QE program.  Is the Fed destined to buck the trend?
–Breadth in the stock market continues to be narrow.  Yesterday AAPL reported with Q4 revenue of $51.5 billion.  I was amazed by this quote from Tim Cook, “Looking at our sales trends I wouldn’t know there’s an economic issue at all in China.”  However, IBM yesterday was down 4% to a five year low.  VRX again closed lower on the day.  The latter two companies are under scrutiny for creative financial engineering.
–The US ten year yield fell 3 bps yesterday to 202.6.  The curve flattened with the red/gold pack spread -1.75 to just 122.75, near recent lows.  The peak one-yr eurodollar calendar spread is  EDM16/EDM17, down 2 yesterday and just barely holding above 1/2% at 53 bps.

Posted on October 28, 2015 at 5:03 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply