The market saw improved volumes across the curve as the markets digested a variety of economic indicators. Most metrics were worse than expected. This caused equities to move lower and short-term interest rates to hold firm throughout the day’s session.
EDU0 99.375/99.625 options put spread vs 99.75/100.00 options call spread, paying 1.75 for the put spread, 20K
EDU0 99.25/99.50 put spread, paying 3 on 20K
May (EDK0) 99.625/99.75 call spread (2x) vs EDM0 99.125/99.25 put stupid, paying 1.5 vs 99.56 for call spreads, 45K.
May (EDK0) 99.25 puts, paying 0.75, outright and covered vs 99.57, 75K.
1. Is LIBOR expected to be elevated well into the third quarter? These September trades paint that picture. The put spread vs the call spread could be someone emboldened by the performance of the EDM0 97/100 call spread. That spread was bought more than 350,000 times at 0.5-1.5 before the you-know-what hit the fan. It’s currently 0.5-1.25. So rolls negative, why not sell it to finance some downside? As for the 92/95 put spread, this is an add. These were bought earlier this month, paying 3.25 on 10K.
2. The May/June package was a big trade, but the more curious part was the execution. This package traded 1.5 on a block, then traded 1.25 on the screen. The assumption here is that the seller was able to quickly turn around and lock in 0.25 tick on a portion of the position. This is the second day in a row that this has happened, as we saw the same thing occur in the Green June trade yesterday (5.5 on block, 5s on the screen). Is this a result of the buyer being impatient or is it harder the ascertain values under current circumstances? Perhaps a combination of both, but I’m guessing the buyer is hoping the pit returns in the future!
3. More LIBOR action, player buying the May puts looking for continued funding pressure. Although relatively cheap, looks expensive when you consider the whole vol curve. The 92 puts have about a 6 delta.