Interest Rate Futures Prices Tank and Yields Rally On Risk-On Sentiment

November 7, 2019 02:30 PM
Another big volume day for options
Futures and volatility lower across the board
EDZ0 was the feature today
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: November 7, 2019

Relatively tame overnight, except for an early morning leg down on China meeting news. This moved picked up steam as rumors of a tariff rollback circulated. Futures continued lower all day, finishing just off their session lows.

Big Trades 

EDZ9 97.75/98.00/98.125 put fly, paying 4.25 on 15K

EDZ0 98.875/99.375 call spread, paying 6.5-5.5 on 40K (see note)

EDZ0 98.50 straddle, selling 50K at 48

EDH1 99.50/99.625/99.75/99.875 call condor, paying 1 on 10K

EDH0 98.50/98.75/98.875 call tree, paying 1 on 10K


Things to Watch in Interest Rate Futures

1)  We’ve seen quite a move in Eurodollar futures this week.

It’s been a combination of reaction to last week’s Fed meeting and renewed trade war discussion. In addition to the big move in futures, there has been a noticeable increase in options activity, with downside strategies being implemented. This is a new development, as previous pullbacks were met with cheap call buying. We are still seeing call buying, mostly call structures. But it feels more like hedges than expressions of opinion.

2)The EDZ0 call spread player was back today with renewed vigor. The total position is nearing 125K. In addition, they have the same position in EDU0, which totals about 150K. My guess is that these are hedges against something else. It’s very possible that the owner of these structures is not concerned with their values as he’s too busy watching the P&L of his other leg.

3)Huge seller of the EDZ0 straddle today. To be clear, this selling started when the 85 straddle was closer to at the money. By the end of the day, we were quoting the 83 straddle. This one is a tough call, but I do believe these are a new position. Regardless, selling 50K at the money straddles is one heck of a bet.

About the Author

Albert Marquez is a Chicago-based options and futures broker, specializing in interest rates. You can reach Albert on Twitter@STIR_Report or