ED Futures and Options Market Recap: December 17, 2019

A slow overnight led to an equally uninspiring day session. Strong housing numbers edged futures lower. Most contracts had a 3.5-4.5 tick range.

Big Eurodollar Option Trades

Monday:

10 Yr Jan (TYF0)/10 Yr Feb (TYG0) 130 call spread, selling 55K at 12 (see note)

EDU0 98.75/98.875 call stupid, paying 8.5 on 15K (see note)

Short Jan (E0F, EDH1) 98.375/98.50 strangle, paying 6.5 on 32K

Tuesday:

EDU0 98.75/99.00 call spread 1x2, selling the 2 legs at even, 10K

EDU0 98.625/98.75 call spread, paying 2 on 10K

Things to Watch in Interest Rate Futures

1) The big 10-year trade recently was a new position in the Jan/Feb 130 call spread (paying 15 on 100K). Yesterday saw the liquidation of a portion. It would seem that the recent agreements with China put a bit of a damper on that strategy. This player was looking for a slow grind higher as we went back and forth on negotiations with China. But with a deal in place or at least a phase of a deal, the optics on this trade aren’t nearly as enticing.

2) Another interesting trade in the EDU0 call stupid. Over the last several months we have seen a big buyer of EDU0 call spreads. The first buy was the 98.875/99.375 call spread, 7.5-8.5 on about 175K. The second trade was the 98.75/99.25 call spread, paying between 5-6 on 125K. Over the last couple of days we have seen some buying of the 98.75/98.875 call stupid, paying 8.5 on around 25K. It looks as if this is the same player, but instead of adding to the existing positions, they are taking advantage of the pull back in futures and the low levels of volatility to buy the strikes they want, at similar prices to the call spreads, and not worry about the short legs.

3) Speaking of volatility, we are skimming across the bottom of the recent range.

The FOMC has passed, and with it goes event risk, and the Fed is on hold. The annual holiday slowdown is in full effect!