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Eurodollar/Treasury Option Roundup, Keep Those Puts Handy

Early Wednesday risk-off accelerated to risk-on in the second half, option accounts happy they held onto low delta (rate-hike insurance) put positions as yields surged back to late Friday levels -- 30YY at 2.2658 +.1653 after the close.
  • Mon-Tue risk-off surge in FI markets tied to knock-on effect of Russia's invasion of Ukraine saw chances of NO hike in on March 16 climb to mid-teens Tue amid growing opinion that current events will/may derail central bank plans to hike rates.
  • Apparently not the case according to Fed Chairman Powell as he sees 25bps liftoff still appropriate on March 16.
  • Early week trade included decent pick-up in call buying in short end Eurodollar options (Whites-Reds, EDH2-EDZ3 climbed as much as 0.470) but legacy positions in low delat puts held.
  • Wed's reversal in rates (Reds -0.27-0.29) saw renewed buying in downside puts. Two salient trades: +50,000 short Dec 95.00/95.50 put spds, 1.5 -- where the upper strike is associated with 4.5% rate by the end of 2023. Meanwhile, block/cross action included 30,000 Jun 98.25/98.50 put spds, 3.0 ref 98.87.
    Treasury option highlights:
  • Treasury option highlights: +7,500 TYJ 126.5/127/127.5 put flys, 3 net -- where June underlying futures are trading at 127-06.5 at the moment (-1-16.5), paper bought over 25,000 TYJ 126 puts at 20. Mixed 5Y trade: Block total of 20,844 FVM 116.25 puts, 16-16.5, while paper sold -35,000 FVJ 119.25/120.25 call spds, 11.5.

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