Interest Rate Futures and Option Volatility Higher On China Trade Deal Doubts

November 18, 2019 03:30 PM
Eurodollar Futures Quiet overnight
ED STIR futures and volatility higher across the curve
Eurodollar Option volume just over 1 million contracts
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: November 18, 2019

Futures traded in a relatively tight range overnight and found their session lows before the pit opening. With little economic news to digest, the market instead focused on a report that China is not optimistic about getting deal done. This sent futures to their session highs, closing just off those levels.


Big Eurodollar Option Trades

Feb (EDG0)/March (EDH0) 98.50 call spread, paying 1 for the EDH0, 53K (see note)

Feb (EDG0)/March (EDH0) 98.125/98.25/98.375 put fly double, paying 10 on 35K (see note)

EDZ0 98.75/99.00/99.25 call tree, paying 0.5 on 10K

Short Feb (E0G, EDH1)/Short March (E0H, EDH1) 98.75 call spread, paying 2 vs 98.65 for the E0H, 25K (see note)


Things to Watch in Interest Rate Futures

1) The EDG0/EDH0 trade was a bit odd. It looks to be a new position as the open interest in the EDG0 was about 43K. Might be some relative value trade. Or maybe it’s a Super Tuesday (3/3/20) wager? Then again, it could just be some cheap upside. We’ll get some more color in tomorrow’s open interest report.

2)  More strike pinning. This trade is like last week’s trade (EDH0/EDM0/EDU0 81/82/83 put fly strip, paying 10). The best guess is that this player liked the idea of the put fly strip from last week but wanted to reduce their time frame. Expensive, but will pay out a lot sooner!  

3) The E0G/E0H trade looks like a roll. The 87 strike in E0G has been active recently, most notably in the overnight Asian hour trades. Last week we saw a buyer of the 86/87 call 1x2, and the week prior was the 86/87/88 call tree (paying even for the one leg). Could be someone that was involved in one of the block trades over the last two weeks shuffling around their position.

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