Interest Rate Markets - Some Trader Really Hates April Eurodollar Calls!

January 28, 2020 03:00 PM
Eurodollar options improved volumes, with screen outpacing the floor
Eurodollar Rate Futures and volatility much lower
A normally quiet day before Fed announcement
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: January 28, 2020

Futures followed stocks lead, as they shook off the virus concern and moved steadily higher throughout the day. Eurodollar futures had a relatively big 9-10 tick range for most contracts, closing near their lows of the session. All eyes turn to the Fed tomorrow.

Big Trades


Short June (E0M, EDM1) 98.375 put vs 98.625/98.75 call spread, paying 2 for the call spread, 10K

EDM0 98.375/98.50 call spread, selling 20K at 3.75

EDH0 98.50/98.75/98.875 call tree, paying 0.75 on 35K

EDZ0 99.25/99.50/99.75/100.00 call condor, paying 1.5 on 20K

Short March (E0H, EDH1) 99.00/99.25 call 1x2, paying 1 for the 1 leg, 20K

EDH0 98.50/98.75 call spread, paying 1 on 25K

Short March (E0H, EDH1) 98.625 calls, selling 10K at 11


Blue Feb (E3G, EDH3) 98.50/98.625 strangle, paying 9.5 on 20K (see note)

April (EDJ0) 98.50 calls, selling 50K at 3.25-3 vs 98.40-98.395 (see note)

Short March (E0H, EDH1) 98.75/99.125 call spread 1x2, paying 3.5 on 20K


Things to Watch in Interest Rate Futures

1) I pulled up this chart yesterday.

A screenshot of a flat screen tv

Description automatically generated
Source: Bloomberg

This is the chart of EDM03 during the beginning of the SARS outbreak. The Fed had just cut 50 bps on November 6th. The news started to come out around the middle of November and continued through May of 2003. EDM03 would have been the 3rd expiration, eventually moving to the first expiration. The low to high move here is worth 80 bps. Now, I’m not suggesting that SARS was the cause of the 80 bps, but I would certainly think it contributed. The economy was on shaky ground and the thought of a global pandemic hurting global growth was on most people’s minds. Sound familiar?

2) Interesting trade in the Blue Feb. When it was going through, I looked back at my records to find any significant trades in that contract, but there were none. This player must be taking advantage of the recent move up in futures and volatility. These expire on the 14th. Clearly they believe that the massive time decay in this strategy will more than offset any gamma risk. And with a wide breakeven band, that may well be the case. But it should be an interesting 2 weeks for this player!

3) Somebody really hates the April calls! These calls were originally sold to finance the buying of the EDU0 83/85 call spread and the EDM0 98.125/98.25 put spreads. Today, they just decided to sell them outright! They aren’t looking for much movement in the EDM0 futures, but let’s not forget they actually started selling the 83 calls before that, when we were about 17 ticks lower!



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