Rates Traders Look For Continuation Of Recent Themes

January 6, 2020 03:00 PM
SOFR options go live
Muted volumes
Futures unchanged to up slightly, volatility mixed
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: January 6, 2020

The first “real” trading day was met with little enthusiasm. Futures trade in a 5-6 tick range for most contracts. No real economic news as markets continue to monitor the situation in the Middle East and look forward to unemployment numbers at the end of the week.


Big Eurodollar Option Trades

EDZ0 98.635/98.875 call spread 1x2, selling the 2 legs at 1, 20K

EDZ0 98.625/ call tree, buying the one leg at 0.5, 40K

EDH0 98.50/98.625/98.75/99.00 call condor, paying 0.25 on 15K

EDM0 98.125/98.25/98.375 put tree, selling the 1 leg at 6, 10K


Things to Watch in Interest Rate Futures

1) SOFR options started trading today. Not much activity, as you might guess. Some early quotes and then later in the day a 5 lot of March straddles traded. Best guess is a small trade was done to test the back office processing before things really heat up. Stay tuned!

2) As traders make their way back to their desks this week, look for a continuation of recent themes. Buying calls and selling puts. This is especially true when we see a pullback in futures. It’s moved skews quite a bit. In fact, the EDZ0 98.25/98.875 risk reversal was quoted around even. With a futures level reference of 98.455 in EDZ0, this represents a put that is 20.5 ticks out of the money and a call that is 42 ticks out!

3) Not a lot of excitement with regards to trades. The EDZ0 trades were blocked before the open. I would say it’s the return of our Asian Hours trader, but these were done at 2:12 am CST, so not exactly the same as before. The EDH0 condor was probably some cheap upside being bought and the rare vol seller in EDM0 was a cover.


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 stirreport@gmail.com.