Big Liquidation This Week of Eurodollar Option Call Spreads

April 3, 2020 03:00 PM
Big liquidation this week of a very profitable call spread position in EDU0
Action in Sep, Eurodollar contract as of late focusing on 99.50-100 calls
Early flow this week was selling Eurodollar in-the-money call spreads
Interest Rates Report

Interest Rates Report

ED Futures and Options Market Recap: April 3, 2020

Today was employment Friday and the number came in far worse than the consensus estimate (701,000 vs.100,000). Markets looked past the data and are still focused on the Covid-19 economic impact. 

Big Trades


EDZ0 99.25/99.75 strangle, selling 20K at 8-7

May (EDK0) 99.625/99.75 call spread, selling 25K at 1.5

EDU0 98.875/99.375 call spread, selling 105K at 46.5


EDM0 98.75/99.00 put spread, paying 1.5 on 20K

July (EDN0) 99.00/99.375 put spread, paying 2.5 on 10K

EDU0 98.875/99.375 call spread, selling 90K at 47

EDZ0 98.875/99.375 call spread, selling 80K at 47


May (EDK0) 99.375 puts vs EDM0 98.75/99.00 put spread (3x), selling EDK0 at 0.5, 30K (30K x 90K)


EDH1 99.75/100.00 call spread, paying 5 on 10K

May (EDK0) 99.375 puts vs EDM0 99.25/99.375 put spread, selling EDK0 at 3.25 vs 99.48, 40K

Green June (E2M, EDM2) 99.125/99.25/99.375/99.50) put condor, paying 1.5 on 40K

EDU0 99.25/99.50 put spread, paying 3.25 on 95K


July (EDN0) 99.625/99.75 call spread, selling 96K at 6 vs 99.62

May (EDK0) 99.25/99.375 put spread vs EDM0 98.75/99.00 put spread with the 99.25/99.375 put spread as a stupid, selling EDK0 at 2.25 vs 99.465 & 99.485, 55K


Things to Watch in Interest Rate Futures

1. Big liquidation this week of a very profitable call spread position in EDU0 and EDZ0. In EDU0, the 98.75/99.375 call spreads were bought way back in September, paying between 7-8.5, with a majority bought for 7.5 ticks. As for the EDZ0, these were bought back in early November, paying between 6-8 ticks, with most being bought in the middle at 7 ticks. So, just with some conservative math, it looks like a profit of about $220M in EDU0 and about $107M in the EDZ0. Now it would be naïve to assume that these were simply bought and held, but I have heard a lot of talk about a particular hedge fund doing very well due to their Eurodollar option call positions. Either way, that’s one of the most profitable trades I’ve seen in a while.

2. The early flow this week consisted of selling in-the-money call spreads. That changed as the week progressed, as a focus on put structures became clear. Take a look at Thursday’s numbers for open interest, for example. Eurodollar option call volume was 696K contracts, which resulted in a net change in open interest of +18K. Closing strikes outnumbered opening strikes 44 to 41. As for the puts, volume was just shy of 1.2M contracts, with open interest increasing by 639K. Opening strikes outnumbered closing strikes 80 to 25. Not sure if this is a change in sentiment or simply protecting those call spreads profits by putting on some downside protection. Something we will continue to monitor going forward.

3. A lot of the action in the September contract as of late had been focused on the 99.50-100.00 calls, either outright or through call structures. Thursday was the first big put spread we have seen in a long time. Then on Friday, we saw the July call spread being sold. This looks like it may be a roll as paper was long a lot of the 99.625 calls from 1.5 ticks. I don’t know if these trades were related, but it was telling that profits were being taken in upside structures and downside structures were being added. It’s almost as if market participants are shoring up their positions in anticipation of September rolling forward and further funding issues are on the horizon.

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