Eurodollar Futures and Options Recap, Slow Summer Trade

Summer trading volumes on a Monday with very little economic data
Pit volume outpaced electronic volume
Heavy action last week in Eurodollar August calls
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: Monday, August 12, 2019

Today we saw muted volumes on a Monday with very little economic data. Futures were bid early in the overnight session and held their levels throughout the day. Pit volume outpaced electronic volume as the focus continued to be on upside structures.

Big Trades

EDV9 98.50 calls, paying 2.5 on 60K (see EDV9 note).

EDZ1 99.50/99.75 call spread 1x2, paying 0.5 on 10K (bought 75K on Friday).

EDH0 98.625/99.00 call spread, selling 90K at 8.5 (guessing a strike adjustment or an out).

Things to Watch

#1 Heavy action last week in August calls. Wednesday saw a large cover, with almost 300K bought at 0.5 tick. This is mainly interesting since these expire Friday (8/16/19). Not sure if is taking off risk or concern for an emergency rate cut, but either way it is unusual.

Aug 82c 080919.png


#2 Last week we also saw a tremendous amount of activity in the October (EDV9) expiration. Over 350K+ call structures were bought this past week, including:

98.375/98.50 call spread, +3.25 on 90K & +3 on 40K

98.625/98.75 call spread, +1.25 on 90K & +1 on 60K

98.25/98.50 call spread 1x2, +2.75 on 60K

98.25/98.375 call spread 1x2 vs 97.875 put, 2.75 credit on 30K

These expire 10/11/19, which covers the September FOMC meeting. It would take a 50 bps rate cut for these to work. Today’s call buyer looks like covering the short leg. Also worth noting that the total Open Interest for the October 98.25-98.75 calls is about 1.5 million contracts. The same strikes in November (EDX9) only have open interest of about 55K. November also covers the October FOMC.

#3 There is continued interest in long-dated calls/call structures involving the 99.00-100.00 strikes. Friday’s EDM0 trade brings the total open interest to over 1M in the EDM0 99.00-100.00 strikes. With rate cuts in play, many players have focused on these strikes across expiration out to June 2021. Open interest in the 99.00-100.00 strikes from EDU0 to EDM1 totals 2.28M+.

About the Author

Albert Marquez works for Chicago Capital Markets (CCM) and covers Eurodollar & Treasury Options and Futures. Albert can be reached  on Twitter @STIR_Report or