ED Futures and Options Market Recap: November 14, 2019

Quiet overnight saw futures put in the range low prior to the pit open. Unmoved by economic releases, the market instead focused on talk that the US and China are struggling to close a phase-1 trade deal. Futures moved steadily higher throughout the session, closing just off their session highs.

Big Interest Rate Trades 

Wednesday:

EDU0 98.00/98.75 risk reversal, selling the calls at 4.5, 80K (see note)

EDZ0 99.25 calls, paying 4 on 25K

Thursday:

Short Feb (E0G, EDH1) 98.625/98.75 call spread 1x2, selling 2 legs at 1.5, 40K (see note)

EDM0 98.625/98.875/99.125/99.375 call condor, EDU0 98.75/99.00/99.25/99.50 call condor as a stupid, paying 5.75 on 10K

EDH0 98.75/98.00/98.125 put tree, paying 0.5 for 20K

EDG0 98.75/99.25 call spread, paying 1 on 40K (see note)

Things to Watch in Interest Rate Futures
 

1) Once again, we are seeing some large trades go through on blocks during Asian trading hours. It also appears that this player likes to operate in blocks of 40K. The EDU0 risky that was traded on Wednesday was two blocks of 40K. The Short Feb block is related to Tuesday’s block of the 98.50/98.625 call spread 1x2 (selling 2 legs at 1.5). Look like they legged into a ratioed call tree.

2) We haven’t seen a lot of action in the Feb contract. In fact, the biggest trade we have seen is the 98.75/99.125/99.50 call fly (paying 4.25 on 80K). My feeling is that this call spread is related to that position. The call fly was put on when futures were higher (98.46), so perhaps the player wanted to put on more of the 87 calls for cheaper. The resulting position looks more like a ratioed call condor.

3) Although volatility was up today, it’s just moving off its recent lows.

Source: Quikstrike

It feels like we are seeing an early start to the holiday markets. It’s hard to envision what would be capable of moving us substantially other than a random tweet regarding tariffs. And herein lies the issue. With yearend fast approaching and a Fed that is seemingly on hold, many traders may be looking ahead to bonuses and unwilling to put much capital at risk, especially if a given strategy can be undone by a random comment from the White House, no matter how well thought out the trade.