Power Play

May 10, 2024

–Market trades as if the liquidity spigots are wide open. Buy everything.  

–Druckenmiller suggested a supply shortage in copper…this morning copper futures have exploded to a new high with HGN4 4.74.  Gold and silver also bid.  Attached is a chart of Dow Jones Utilities, powering higher, due apparently to an insatiable demand for electricity.  Utilities are correlated with bonds, and the long bond yield has dropped 20 bps since April 25, from 4.81% to 4.60%.  What’s driving what?  PPI and CPI next week, Tuesday and Wednesday.  

–Seemed like a light volume day yesterday, but there were quite a few bullish option plays on rate futures.  Five year yield fell just over 4 bps yesterday to 4.458%, leading the decline in yields.  FVM was +6 to 105-267.  Open interest surged 64k to 6.15 million.  I think that might be a record.  Again, volume was quite low.

–On May 1, TYU4 settled 108-115
TYN4 109.5c 0’39s
TYN4 107.0p 0’35s so 4 to the call

Yesterday, TYU4 was almost exactly one point higher at 109-11
shifting strikes one point higher:
TYN4 110.5c 0’30s
TYN4 108.0p 0’26s
Still 4 to the call, though lower vols. 

A lot of bullish rate plays. Solid 30 yr auction.  
SFRZ4 9468/9443ps cov 9511.5, -27k 3.0
SFRU4 9493/9512/9525/9543c cond 2.75 to 2.875 paid 25k
SFRU5 9550/9650cs 39.0 paid 10k
SFRZ4 9550/9650cs cov 9515.5, 10.75 paid 5k
TYN 11.5c and 112c 23k bot each, 13 and 9
TYM 108.75/109.75 rr cov 109-01, 59d 0 to 1 paid call 20k
FVM 106.5/107cs 4.5 to 5.25 paid 25k (6s, new)
TYN 108/09/10 c fly 12 paid 10k

Posted on May 10, 2024 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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