BONUS: “Free” Straddle

By | October 1st, 2017|Featured, Positioning|

From time to time, I'll post an occasional trade.  You'll need a reasonable cost structure to take advantage of this opportunity. On Friday I sent out the following trade: I saw EDZ7 98.625 call trade 1.5 and that seemed really cheap.  The premise of the trade is to get a "zero cost" straddle.  In fact, according to my numbers, I think you GET PAID for owning this straddle.  This would be to buy 100 EDZ7 98.625 call vs Sell 12 FFF8. I'll do the full write-up this weekend.  But basically, the EDZ7 call traded 10K times at 1.5.  FFF8 should [...]

Legging Lessons

By | September 17th, 2017|Basics, Featured|

Since some of you may be new to ED trading, I may occasionally do a “Trade Basics” segment.  There was an interesting trade that went through on Friday, and I thought I would discuss it.  Almost 25K EDU7-EDV7 spreads traded.  This is a crazy amount to have traded, considering the open interest on EDV7 is only 103K contracts.  I’m assuming this is probably some kind of unwind.  There appears to be an equally unusually large volume on this spread trade on August 2, and since EDU7 rolls off Monday, it seems reasonable to conclude that this was an unwind of [...]

ED-FF Spread

By | May 8th, 2017|Featured, Positioning|

[From time to time, I will post trade-related commentary from the web site.  The EDM7-FF spread collapsed the following week and this trade thought has resulted in one profitable trade and the second order effect of the ED-FF curve steepening has given us a an initial profit on a second trade.] One of the more interesting developments this year has been how the ED-FF spread has collapsed.  Take for example EDM7 vs FF.  It was over 35bps at one point this year, and it settled over 15bps lower on Friday.  I suppose considering we’ve had a yield-grab rally, it makes [...]

Widen Your Trading Horizons

By | March 13th, 2017|Basics, Featured|

One of my pet peeves about trading is how the general trading population can only think in terms of “up or down.”  As a result, people tend to under-appreciate market commentary that is not related to correctly predicting/forecasting/guessing “up or down.”  I wanted to discuss the various forms of analysis that you can make use of: Correct directional analysis. This is unquestionably useful when correct, but very few people are right significantly more than about 55-60% of the time.  Very few.  If you take a longer time horizon, that number could be higher.  But it would be unrealistic to think [...]

Trump’s “Master Plan”?

By | January 29th, 2017|Economy, Featured|

[From time to time, I'll write an article for Seeking Alpha. Below is the summary of the article that was published on February 2, 2017. To read the full article, go to seekingalpha.com] Summary • We have seen the past few quarters how much the Trade Balance can affect GDP. • Trump's "puzzling" foreign policy actions are wholly consistent with reducing the Trade Balance with various counterparties. • One of Trump's strengths is negotiating, and he is using some classic negotiation tactics with various countries. I discuss what he is trying to accomplish in the various parts of the world. [...]

CA Global Expansion

By | January 1st, 2017|Economy, Featured|

I’ve wanted to look at non-USD STIR futures for some time now, but it never looked like another central bank was going to active enough.  We may be on the brink of a series of moves from a central bank other than the Fed, which would give us a curve that could have a tradeable shape.  For now, I want to add the STIR futures from the time zones closest to me – Canadian BA futures, Euribor futures and Short Sterling futures. The primary focus of the CA newsletter will be the US markets, but we should look for attractive [...]

The Six Pillars of Long Rates

By | December 12th, 2016|Basics, Featured|

There are Six Pillars of low rates in the long end. You’ve heard me discuss these in the past, but not presented in this way. We have the Big 3 QE central banks (ECB, BOJ and the Fed), plus three other factors (the neutral rate, inflation, and demographics). I thought we should do an inventory of where we stand on these various drivers to gauge the potential long-end selloff: • The ECB’s QE. The ECB was a little late to the QE party. But they had been buying €60B per month since March 2015 (with the exception of this 12 [...]

Watch out for March 2018

By | December 4th, 2016|Featured, Positioning|

I have a whole discussion of the U7 3mo double fly that traded about 100K times last week (including an 80K block trade) in the Appendix emails.  The tl;dr (too long; didn’t read) takeaways and additional implications are: The March 2018 meeting is going to be the first meeting with a potentially new Fed Chair.[1] This meeting has more risk of a “break” in the typical pattern of Fed meetings, and that part of the curve is more susceptible to a severe kink. A large market participant (the “800lb” gorilla) is selling EDH8 (buying the March 2018 meeting). Open interest [...]

Book Review: The Next Perfect Trade by Alex Gurevich

By | June 14th, 2016|Basics, Featured|

I’ll give it 5 stars (out of 5). I’ve referred to Alex a few times in the Forums, but not by name.  He is the former colleague who regularly had $100+ million P&Ls.  I did not realize that he wrote a book late last year.  As soon as I found out, I ordered it on Amazon. Let me give you a little background.  Even though we traded on the same desk and we both did many more trades than the average trader, I would say that the overlap was almost non-existent on the types of trades he did and the [...]

Trade Implementation

By | June 7th, 2016|Basics, Featured|

Traders spend a majority of their time thinking about their view.  Think about ALL the cumulative manpower and brainpower involved in the analysis of markets and most of it focuses on “up” or “down.”  Traders don’t spend nearly as much time thinking about the implementation of that view.  It would be one thing if people were right more than 60% of the time, but it’s typically not if you compare the results to a relevant benchmark. If you are only going to be right 55-60% of the time (at best for the vast majority of traders), then the expression of [...]