Eurodollar Options Trading Recap

January 17, 2020 08:00 AM
Futures mostly lower, volatility mixed
Muted volumes continue to be a theme
Tight ranges, with most of the curve trading with 5-5.5 ticks
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: January 16, 2020


Quiet overnight session, punctuated by a familiar block trade, leads to a muted day session. Futures moved steadily lower throughout the morning before closing near mid-range.

Big Trades

EDH1 98.625/98.875/99.00 call tree, paying even on 20K (see note)

EDU0 98.25/98.625 risk reversal, selling the call at 2.5

EDM0 98.125/98.25 put spread, paying 2.25 vs 98.325 on 25K (see note)

EDU0 98.875/99.00 call stupid, paying 5 on 10K

EDZ0 98.00/98.125 put spread vs 99.50/99.75 call spread (2x), paying even for the call spread, 15K


Things to Watch in Interest Rate Futures

1) Asian Hour Block Trade Alert! EDH1 call tree is definitely an add:

As I have stated before, this player likes to operate during those hours, loves trees and executes in lots of 20K (often 40K blocks). 

2) Back again today buying the EDM0 put spread. I had speculated yesterday that it may be in fact the put fly strip player taking off the bottom spread of the EDM0 98.125/98.25/98.375 put fly. And open interest seemed to confirm this as both strikes saw significant drops in open interest yesterday. Perhaps they are concerned that we will run through the 82 strike. Or maybe they just figured that the 82 strike had been beaten so mercilessly that it was a cheap out. I tend to believe it’s the later as I can’t think of many scenarios, outside of a FRA/OIS situation, that would move us past the 82 strike before June expiration. Keep an eye on the Sep too!

3) Perhaps one of the biggest talking points of the day was the announcement that the U.S. Labor Department will ban all electronic devises from “lockup” rooms. This is the secure room where journalists receive the data 30-60 minutes early in order to digest the info and write stories, then release their takes at the actual release time. The concept is to level the playing field, so that there’s no opportunity for an advantageous leak prior to the release time. The question becomes, what will the end result be? Will there be frantic, algo-driven volatility immediately after the release, followed by a more orderly, less noisy directional move following human digestion of the data? Guess we’ll find out after March 1st when this goes into effect. Should be interesting, none the less.


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