About 45 minutes into the session and we are seeing more defensive plays – especially in options vs. the Mar. 2012 Eurdollar futures contracts. By the time I publish this Bernanke will be testifying and we will have digested some reports on construction spending and ISM manufacturing.
Currently 9:36 a.m.c.s.t. Bernanke just testified to the following:
- $150 – 200 bln. of quantitative easing is roughly equivelant to a 25 basis point rate cut.
- Therefore QE II is roughly equivalent to a 75 basis point cut – which given the current economic decline – historically this is not outside the realm of previous easing cycles.
- Prior to this point he made the point that inflation will run around 1% or so this year and 1.5 to 2% next year. To me that means no rate increases. The Mar. 12 ED futures which have been subject to a lot of option activity have moved a couple of ticks since the testimony started.
Take note of the defensive flows noted yesterday.
In 10’s as chart below shows market started selling off near yesterdays close. As a matter of fact if you look at a 5 minute chart you will see a volume spike of over 40K at 1:55 p.m.c.s.t. – which is 5 minutes before the open outcry close. Prices moved steadily lower from there. Around 5:00 a.m.c.s.t. the RSI on the hourly was quite low. Same story on 30’s. I bought both, but unfortunately was stopped out on the 30’s. Still long from lower levels on the 30’s. Did not get stopped out on the 10’s so will be looking to move stop loss up once market signals a low has been made. Call for more if interested.
Larger flows in options listed below - note activity vs. the EOH strikes.
| 3/1/2011 | |||||
| Icap | S | 2,000 | EOJ9887c vs EOH9887c | 7 J over | N/A |
| Locals | B/S | 5,000 | EDH13 9787/9800 c spread | 3.5 | 9775/75.5 |
| Paper | B | 5,000 | EOH 9887/9900 p spread | 2 | 9910.5/11 |
| Paper | B | 10,000 | EOH 9900/9912.5 pspread | 4 | ^9911.5 28% |
| Paper | S | 1,500 | EOH 9912 strad | 12 | 9911 area |
| Screen | B | 10,000 | EOH 9887/9900 p spread | 2 | 9910 to 11 area |
| Paper | B | 3,000 | EOH 87/90 psprd vs EOH 93/95 csprd | 1 p sprd over | 9911.5/12 |
| CCM | B | 5,000 | EOH85/87 p spread | .25 (cab) | 9913/13.5 |
| CCM | B | 10,000 | EOH 9900 put0 | 2.5 | 9912.5/13 |
| Paper | B | 2,000 | EOH 9900/9912.5 p 1X2 | 1 | 9912.5/13 |
| Fed Fund Opts | |||||
| Mann | B | 1,000 | FFN9981/9987 p 1X2 | even | 9984.5/85 |
| Paper | B | 1,000 | FFN9981/9987 p 1X2 | 0.25 | 9984.5/85 |
| Mann | B | 1,000 | FFN9981/9987 p 1X2 | 0.25 | 9984.5/85 |
| Paper | B | 500 | FFN 9981/9987/9993 c fly | 3.75 | 9984.5/85 |
| 10yr. Opts | |||||
| TJM | S | 4,500 | TYK116/118.5 ps vs. 124c | .50 ps over | ^11817 |
| New Edge | B | 2,500 | TYJ 116/118 ps | 0.32 | 11816/17 |
| Paper | B | 1,000 | TYJ114.5/116 p 1X2 | 0.04 | 11821/22 |
| Paper | B | 2,500 | TYJ118.5 strad | 1.57 | 11815/15.5 |
| Mann | S | 1,000 | TYJ116/117.5/118 p tree | even pieces over | 11816/17 |
| CSFB | S | 1,500 | TYM113/113.5 p sprd | 0.02 | ^11815.5 |
| Paper | B | 600 | TYJ116/117/118 p fly | 0.08 | 11824.5/25 |
| Paper | B | 500 | TY Wk 2 117/118 p sprd | 0.14 | 11824.5/25 |
| Paper | B | 2,000 | TYM113 p | .14 and .15 | 11817 to 19 |
| Goldman | S | 1,500 | TYM119/120/120.5/121.5 p condor | 0.09 | ^11818 |
| Paper | B | 500 | TYM 118.5 strad | 3.15 | 11822.5/23 |
| 30yr. Opts | |||||
| CSFB | B | 1,000 | USJ 117 puts . | 0.32 | 11922 |
| 5yr. Opts | |||||
| Paper | B | 2,000 | FVJ115.5 p | 0.14 | ^11621 |
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