Zeus and Kronos
December 21, 2020
–Large reversals this morning across markets. Crude oil down nearly 6%, ESH down 1.75%, GBP down 2.25% as is copper. A series of factors could be catalysts, 1) “sell the fact” as the US finally passed a $900 billion stimulus package 2) a new more infectious strain of Covid in the UK to ring in the new year 3) lack of a Brexit deal 4) TSLA’s inclusion into the S&P 5) continued adjustment to index rebalancing after Friday’s December expiration 6) the conjunction of Jupiter and Saturn, which should be quite a sight. (As Ron Burgundy might say, “…by the beard of Zeus”).
–In any case, the holiday week will feature thinner than usual market conditions with the possibility of exaggerated moves.
–Net changes in interest rate futures remain muted, though the curve steepened to new highs on Friday. Tens rose 2 bps to 94.6 while thirties added 2.4 bps to 169.8. 2/10 spread ended at 82.5 (+2.4) while 5/30 finished at 131.8 (+1.7). Again, these levels have been erased with the start of a new week, with tens currently 90.5
–On Friday there was a buyer of 4EH 9912/9887/9875p 1x3x2 ratio fly for 4.5 ref 9913.5. Likely able to buy this trade for lower premium today.
–Jan treasury options expire Thursday at 12:15 Chicago time. Check with your clearing firm for manual exercise/abandon time cut offs.
