Mutant virus worries fade
December 22, 2020
–Monday started with mutant virus fears, but concerns seem to have dissipated as the day progressed.
–Buyer of 50k TYG1 138/137p 1×2 for 6 covered 137-25 with 5d, Settled 6 vs 137-245. This appears to be a roll-up of long 137 puts, which were crushed by this trade. To give an idea, on Friday TYH settled 137-24. The 137/138 p 1×2 settled 4. Change of 2/64’s at the same futures level. On Friday, the 137/138.5 risk reversal settled 5 vs 137-245, 20 for the put and 15 for the call. Yesterday the call was unch’d at 15 but the put declined 2 to 18.
–Recall that in October, on the 20th, ppr paid 3 for 50k TYZ 139/138/137.5 p tree vs 138-24. At that time there were 31 days until expiry. Now everything is exactly a point lower, with 31 days left for Feb expiry, and the TYG 138/137/136.5p tree settled 13! ( 42 18 and 11 ). Obviously the risk/reward parameters have changed over time.
–News today includes revision to Q3 GDP exp 33.1 same as last. Existing home sales as well and Conference Board Consumer Confidence expected 97 from 96.1
