Multiple Block Trades in 10-year Treasury Futures Near Highs of Day

Below average volumes in options
Volatility mixed, with fronts down to flat
Floor volume outpaces screen volume, but block trades showed the most volume
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: October 24, 2019
 

The slow overnight session was punctuated by some large block trades entered yesterday evening. Futures touched their lows early in the morning and worked their way to the top of the range shortly after the equity open.


Big Trades 
 

Short Dec (E0Z, EDZ0) 98.625/98.75 call spread 1x2, selling 2 legs for 0.5, 40K (see note)

Short Jan (E0F, EDH1) 98.25/98.375/98.50 put tree, paying 2 on 30K

Short Dec (E0Z, EDZ0) 98.25/98.375/98.50 put tree, paying 3 on 40K

Short Jan (E0F, EDH1) 98.50 puts, paying 11 on 15K

EDM0 99.00/99.125/99.375/99.50 call condor, paying 1 on 15K

EDZ9 98.25/98.375 call spread vs EDM0 99.125/99.25 call spread, selling the EDZ9 for 0.5, 30K (see note)

 

Things to Watch in Interest Rate Futures
 

#1 Big trades in 10-year futures today. We saw multiple block trades go through in the Dec (TYZ9) expiration: 129’255 on 7K, 129’295 on 5K, 130’010 on 9083, 130’02 on 6K and 130’015 on 5K. I did not see any offsetting trades in any other treasuries or Eurodollars. And based on where the futures were at the time of these trades, they paid up quite a bit. It will be interesting to check the open interest tomorrow.

#2 The Short Dec and Short Jan trades were block trades from late yesterday evening (8:00-10:00). The assumption is that these are Asia trades. The E0Z call spread 1x2 was the most curious, as it was well off the values I saw in my model. In fact, that exact spread traded on the screen at 1.5! My best guess is that this was some sort of intrabank trade, moving positions between books. Open interest will give us more info tomorrow.

#3 The EDZ9 vs EDM0 call spreads looks to be a roll, as the paper has been very active in the Dec structure. As for the EDM0, it’s hard to say. Whenever I see 12.5 bps wide spreads like that, I tend to assume it’s a hedge against something else. Therefore, I’m going with a hedge roll for this structure.

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 amarquez@ccmmarkets.com