Interest Rate Markets React To Potential Hit To Global Growth

January 23, 2020 03:00 PM
Much improved Eurodollar options volume, over +1M contracts traded
Eurodollar Rate Futures and volatility higher
Markets react to potential hit to global growth due to virus outbreak
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: January 23, 2020

With little economic data to key on, markets instead focused on the Wuhan coronavirus outbreak and its possible ramifications. Futures chugged steadily higher throughout the morning, only to retreat later in the session as nerves calmed.

Big Trades

EDH0 98.50/98.875 call spread, paying 0.5 on 30K (see note)

EDZ0 97.875/98.125 put spread, paying 2 on 10K

April (EDJ0) 98.375 call vs EDU0 98.375/98.50 call spread, selling the EDJ0 at 0.5, 10K

EDH0 98.25/98.375 put spread, selling 15K at 11 (see note)


Things to Watch in Interest Rate Futures

1) The EDH0 call spread is an add. Paid 0.25-0.75 on about 75K back in December and paid 0.25 on 35K of the 1x2 spreads. The interesting thing about this trade was that it was done around 4:00 am CST. Pretty sure this was about the time we started getting new headlines about the Wuhan coronavirus. If memory serves me correctly, the SARS outbreak was good for about 15-20 ticks, so perhaps that’s what this player was thinking.

2) Odd trade in the EDH0 put stupids. As we’ve discussed, ad nauseum, paper sold a lot of the 82 strikes across the EDH0, EDM0 and EDU0 expirations. Most were done through the purchase of about 150K EDH0/EDM0/EDU0 98.125/98.25/98.375 put fly strips. My thinking on this particular trade is that the put fly trader was taking some profits by selling the 83 puts and doubling down on the 82 puts. It might be the right idea. As for the timing, maybe he got a call from the March call spread buyer.

3) While the SOFR options haven’t seen a lot of interest yet this year, it looks like the futures are once again seeing increased action. Today we saw the One Month SOFR futures trade vs the 30 Day Fed Funds futures. 1,000 traded in the March expiration (SR1H0 v ZQH0), 1,200 April (SR1J0 v ZQJ0) and 3,200 in the May expiration (SR1K0 v ZQK0).



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