Snow in April in Chicago. Normal

April 17, 2020

–Stock futures jumped to new highs shortly after the close yesterday evening as Trump announced re-open plans and a drug from Gilead apparently showed promise of rapid virus relief.  ESM made a high of 2885, up nearly 100 from settle.  On the other hand, China released Q1 GDP down 6.8%.

–Curve continued to flatten yesterday with twos unchanged at 20.1 bps and tens -2.6 to 60.9.  In dollars red pack fell 0.375 to 99.7125 while golds rose 1.75 to 99.30.  Notable trade in July puts (EDU0 underlying).  EDN0 9962/9950p 1×2 -0.75 paid for 50k and EDN0 9975/9962/9950/9937p condor 4.25 paid for 50k.  Open interest in July puts increased 335k, expire July 10.  Settles from 9975 down, 13.5, 7.5, 4.25, 2.5 vs EDU 9964.5.  So the 1×2 settled -1.0 and the condor 4.25.  Neither of these trades wants to see EDU0 much below 9950 at expiration, and that with current libor at 113 bps.  A note by Pozsar suggested a continued drop in lib/ois which may have been impetus for these trades.  On the other hand, a magic bullet drug combined with sloshing stimulus might make things look a lot more ‘normal’ by late summer.

–Vol firmed quite a bit in dollars.  EDM0 9950^ settled 20.5 having been as low as 18.5 earlier in week.  On Wednesday, 0EU 9975^ settled 16.0, yesterday at 18.5.  2EU 9962^ went from 23.5 to 27.5 and 3EU 9950^ from 32.5 to 35.5.  The red/green eurodollar pack spread posted a new low of just  11 bps yesterday, but it seems to me that the midcurve straddle curve continues to suggest a much steeper curve in the near future.     

Posted on April 17, 2020 at 5:27 am by alexmanzara · Permalink
In: Eurodollar Options

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