ED Futures and Options Market Recap: December 12, 2019

Once again, the biggest move of the day came on the heels of a Trump tweet. Quiet overnight led into the pit open. Less than favorable economic numbers moved futures higher. Then the tweet hit about a China trade deal and futures immediately moved lower. One more flash bomb about China just before the close and we closed just off the day’s lows.

Big Eurodollar Option Trades

EDM0 99.00/99.125 call spread, paying 0.5 on 75K (see note)

EDU0 98.75/99.25 call spread, paying 4.75-5 on 30K (see note)

EDH0 98.375/98.50/98.625 call fly, paying 1 on 17K

EDM0 98.125/98.25 put spread vs 98.375/98.50 call spread, paying even for the call spread on 55K (see note)

Things to Watch in Interest Rate Futures

1) Once again, futures get hit and call buyers step in. The EDM0 stepped in shortly after the initial move lower. Looks to be an add as this spread was originally bought back in September (paying 2, futures reference level 98.435, ATM vol level 62.81 ABPV). There has also been a lot of action in the 99.125/99.25 call spread and both trades look more like cheap upside hedges rather than policy path bets. But the song remains the same, futures and volatility down is an opportunity to reload/add/adjust existing upside structures.

2) Similar idea in the EDU0 call spread as the EDM0, but this player decided to set their levels and wait. The resting five bid got hit as we moved lower, only to be followed by a reload at 4.75, which also was hit shortly thereafter. Paper is now long about 200K of the 98.875/99.375 call spreads and about 100K of the 98.75/99.25 call spreads.

3) The EDM0 call spread vs put spread had a familiar feel to it. Last month, paper was a seller of the 98.25/98.375 put spread vs buying the 98.50/98.75 call spread, paying between 1 and 2 ticks on over 100K. Looks to me like this player wanted to take advantage of the pullback to widen out his existing position.