Interest Rate Futures Huge Swing Up, Then Down, Then Another Missile Hit?

Crisis averted? Report New Missiles Hit Baghdad Around Stock Close
Big rates volumes on back of geopolitical tension
Interest Rate futures end day lower, volatility lower
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: January 8, 2020

Futures experienced big ranges as the situation in the Middle East escalated overnight. Huge ranges, especially in Reds & Greens with many contracts experiencing 18 tick swings. Futures hit their lows near midday as Trump spoke and eased tensions. Futures closed at or near their session lows.

Big Trades

EDH1 98.625/98.875/99.00 call tree, selling 2 legs at 0.75, 80K (see note)

EDM0/EDU0 98.25/98.375 call spread spread, paying 1 for EDM0, 45K

EDH0 98.625/98.875 call spread, paying 1 on 25K

EDG0 98.50/98.75 call spread, paying 1 on 20K

EDH0 98.25 puts, selling 20K at 2.75 (see note)

EDM0 98.25/98.375 put spread vs E0M 98.125/98.375 put spread, paying 1 for EDM0, 10K

EDU0 99.00 calls, paying 3 on 30K

 

Things to Watch in Interest Rate Futures

1) Wild overnight session! Iranian “retaliation” moved futures up aggressively at the start of the evening session yesterday, only to see a full retracement as the facts emerged. Not sure how much the market reacted to a good ADP number, but we hit our lows following a speech by Trump that allayed any fears of further escalation of the tension in the Middle East. The situation has proved to be a convenient distraction from the impeachment proceedings and most likely a confusing, and potentially costly endeavor, for the algos. Keep your head on a swivel people!

 2) Well, looks like our Asian Hour Block Trader is definitely back. Two blocks of 40K traded early in the evening session, typical of this particular trader. Unfortunately, the timing could have been better as futures were near their highs at the time of execution. In fact, near the pit open this trade was 2-3 for the two legs.

 3) As I said before, nobody likes the 98.25 strike! It started with put fly strips that I mentioned yesterday, then morphed into any strategy that involved selling those puts. Today, it was just outright selling of the puts. Paper is not even trying to dress it up anymore. Relentless!

 

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