ED Futures and Options Market Recap: February 28, 2020

As has been the case all week, futures driven higher on virus fears. Focus continues to be calls and call structures. Risk-off heading into the weekend.

Big Trades

EDH0 98.625/98.75/98.875/99.00 call condor, paying 1.75 on 20K

EDH0 98.625/98.75 call spread, paying 3 on 72K

EDH0 98.625/98.875 call spread, paying 4-4.5 on 60K

EDM0 99.75/100.00 call spread, paying 1.5 on 25K

EDH0 98.75/98.875 call 1x2, paying  -0.25 (credit) to even on 110K

May (EDK0) 99.00/99.125 call spread, paying 3.25 on 20K

EDH0 99.00/99.25 call spread paying 1 on 30K

May (EDK0) 99.25/99.50/99.75 call fly, paying 2 on 40K

EDM0 98.625/98.875/99.25 call fly, selling 100K at 2.5 (see note)

Short Dec (E0Z) 100.00 calls, paying 2.5 on 80K (see note)

Things to Watch in Interest Rate Futures

1) Wow! What a week. We traded 20.7M contracts from Monday through Thursday. I don’t know where today will end up, but I have to believe it will be north of 5M. Relentless call buying. One interesting observation is that once we start getting into the 99.50-100.00 strikes, it’s common to see 1x2 call spreads. This week we saw more call spreads (1 to 1). It makes you wonder if traders are contemplating a world of negative rates?

2) What appears to be a call structure seller is actually a roll. The June call flies are a roll of a previous position. Last week we had a lot of June call buying, including the 98.625/98.875 call spread (paying 3.5 on about 150K). So they sell the call fly and stay long the 98.875/99.25 call spread. Take some profits off the table and stay in the game. Now that’s a scalable trade!

3) We’ve seen buying of the 100.00 calls before. Usually, it’s in the form of a call strip, such as the Red Par Strip (i.e. EDH1/EDM1/EDU1/EDZ1 100.00 call strip). I don’t recall seeing any size trades of one particular 100.00 call before today. But 80K is a big bet on 0% rates!