Trade Idea in Eurodollar Options

Eurodollar options call skew is not trading normal
Expect a smaller interest rate cut than market anticipates
This is a Trade Idea and not investment advice. Do your own research
Eurodollar (STIR) Trade Idea

Eurodollar (STIR) Trade Idea

A massive move higher in interest rates futures (lower in yield) and abnormal call option skews has created a trading opportunity. 

It's a risk-off trade, but it's also a view that the political drama between President Trump and Fed Chairman Jerome Powell is ultimately going to fade.
 

Why we like trade?

We believe the FOMC committee will make changes to the Fed Funds Rate at a slower pace than the market anticipates. The interest rate market is pricing a 71 basis point rate cut between June 2019 and June 20. We anticipate the FED will not lower interest rates 75 basis points in the next year.

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Trading structure in Eurodollar Futures and Options?

Trade Structure 1: We are buying Eurodollar (STIR) June 2019-June 2020 1 year calendar spread.

QuikStrike Analytics


Trade Structure 2: We are selling Eurodollar (STIR) 98.50-99 call spreads 
 

Quikstrike Trading Analytics

Just remember, this is trade idea only and not investment advice. Do your own research and consider your risk tolerance. Know your risk.

Disclosure: We have trading positions in the same or highly correlated trading structures. 

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