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Eurodollar/Tsy Option Roundup: Rate Hike Insurance Buying

US EURODLR OPTIONS
Prospect of higher inflation lasting longer than estimated weighed on global rates markets Tuesday as markets back to pricing in more rate hikes this year.
  • In turn, Eurodollar and Tsy option flow revolved around better downside, rate-hike insurance buying via outright puts and put spds.
  • Salient Eurodollar option trade revolved around June midcurve options (uses mid-2023 futures as underlying, but expires at same time as front June options): short June 96.00/96.50 put spds at 2.5 and short Jun 96.50 puts outright. Near-term hike insurance: option block buy of 6,000 July 97.1297.43 2x1 put spds at 6.0 while paper partially funded buying August 97.12/97.50 put spds with sale of 97.68 calls for net debit of 3.5.
  • Some highlight Treasury option trade included buying 18,000 FVN 111.75/112.75 put spds at 20.5, +10,000 TYN 114.5 puts at 3 ref 119-08.5 -09.5 and 4,000 USN 137/135 out spds at 29 ref 139-07.
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