EUROPE SUMMARY: Playing Bailey Both Ways

Options traders appeared to play the bearish move in the wake of BoE Gov Bailey's comments this morning pushing back against negative rate speculation. This went in both directions though, with the timing of a cut moving back to March vs February previously, and some potentially looking to take advantage of the shift. After Bailey spoke we saw LV0 99.875/99.75 ps, bought for half in 3k - a downside structure with 24 days to expiry. But on the upside, the standout was LM1 100.25/100.50cs 2x1,bought for close to 60k x 30k (ref 100.045, 36 del) - targeting a rate cut in Q2 2021.

We saw some paper-to-paper liquidation in Euribor too: ERZ1 100.375/100.00ps 1x1.25 sold at 1.5 in 5k, and ERH2 100.375/99.875ps, 1x1.5, sold at 1.75 in 10k.

Other trades of note included:

• LM1 100.00/100.12/100.37 broken call fly, trades 0.25 in 1k
• LG0 100.125/100.25cs 1x1.5, bought for 1.5 in 6.25k
• LV0 99.875/99.75 ps, bought for half in 3k.
• 0RH1 100.625/100.75 call spread v 100.50/100.375 put spread, paying -0.25 for the call spread in 3k
• RXV0 (Oct) 174.00/173.50ps, sold at 9 in 2k (expiry Friday)
• 0EX0 134.75/135/135.25 c ladder, bought the 2 for 7.5 in 1k