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.
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.