Interest Rate Recap: Eurodollar Futures Lower Despite Disappointing ISM Report

Quiet overnight session
Improved volumes after long holiday week
Futures and volatility mostly lower
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: December 2, 2019

A quiet overnight session, which saw futures put in the low for the day, led to a more active day session as traders got back to the markets after a traditionally slow holiday week. Disappointing ISM numbers contributed to the steady climb higher as futures closed near their range highs for the day.

 

Big Eurodollar Option Trades

EDM0 98.375/98.50 call spread, selling 10K at 3.5

EDM0 98.125/98.25/98.375 put fly, paying 3.5 on 80K (see note)

Short Jan (E0F) 98.75/99.00 call spread with the Short March (E0H) 99.00/99.25 call spread, selling 30K at 2.75 (see note)

EDU0 98.75/99.25 call spread, paying 6 on 40K (see note)

EDM0 98.25/98.375 put spread, paying 7 on 20K

EDH0 98.375/98.50/98.625/98.75 call condor, paying 1.75 on 15K

 

Things to Watch in Interest Rate Futures
 

1) A lot of action in the EDM0 put fly across all venues (block, screen, pit). This is interesting because this fly was part of the big put fly strip that has been trading (the buyer of the EDH0/EDM0/EDU0 98.125/98.25/98.375 put fly strip, paying 7.5-8 on 50K, paying 10 on 15K). It looks to be the same player here, so perhaps zeroing in on the June expiration. Also of note, the EDM0 contract is the only 2020 contract that expires after the FOMC meeting (FOMC meeting on June 9-10, EDM0 expires June 15th). A Fed on hold and a FRA/OIS contraction puts this fly in play.

2) The Short Jan, Short March trade was an exit. This player put this on at the end of October, paying 5.5-6.25 with futures trading around 98.48. It gives you a good idea of what volatility has done since then!


Source: Quikstrike

3) The EDU0 call spread is an add, of sorts. It looks to be the same player who bought the 98.875/99.375 call spread back in October (paying 7-8.5 on 150K). Taking advantage of the move in volatility to buy a closer call spread for less premium than their original trade. We’ll see if there’s more behind it.

 

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