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Weston NakamuraVisionary
Japan & US Global Macro Markets

LONG CME Eurodollar Dec’21 100.00 CALL, LONG CME Eurodollar Dec’21 99.875/100 Call Spread

2 trades:

1. Long CME Eurodollar Dec’21 100.00 CALL (GEZ1 @0.005

2. Long CME Eurodollar Dec’21 99.875 / 100.00 BULL CALL SPREAD (GEZ1 99.875/100 CS) @ 0.00

Time frame: < 1yr (up to expiry)

Expected gain (max before taking profit):

•100C @ 0.005 ($12.50/contract) → 0.100 ($250/contract) +1,900%

•98.75/100 CS @ 0.00 ($0)→ $725 per call spread

Max Loss:

•100C @ 0.005 ($12.50/contract) → 100%

•98.75/100 CS @ 0.00 ($0)→ Risk free

Eurodollar futures from June’21 forward have sold off since election/Biden + Pfizer vaccine news as FOMC rate hike probability inches up. 100 strike calls = bet on market pricing neg rates in US.

Note: “MARKET PRICING IN Fed Funds at/below zero,” and not “FOMC OFFICIAL POLICY RATE CUT NEG“ - don’t need neg rates, just need market to believe it. Fed Fund Futures were above 100 (neg rates) for many weeks on end this summer. Eurodollar futures can easily scare as well.

IF GEZ1 hits 100, my view is that they won’t just sit at 100.00, they’ll over-shoot well through 100.00 (once zero blind is broken, Fed theoretically could cut indefinitely neg) setting up for convex return profile on ITM calls.

100 strike calls filled at 0.005 is bottom tick- there is no cheaper increment below, literally market bottom (0.005 = $12.50/contract).

99.875/100 call spread filled at zero is self explanatory- you have the trade on for free. upside is capped to just under $800, but cost at zero means any upside is infinity % return

This is... (More)

Friday 12/4/2020

  • Real Vision: The Documentary
  • Russian Baby
  • Markets Napping
  • Trading Psychology: ”Imposter Syndrome”

APAC Friday 12/4/2020

Nothing to see here today.  Bit of a nothing day.  Market opened flat, stayed flat, had a surge at lunch which it faded slightly into the cash close, but held the gains.  

Cross markets was no better - Nikkei off a touch, Dow up a bit.

ODDLY - crude oil had a big spike and held the gains.  Haven't seen anything commenting - happened about 11:30ish.  Random but curious.

BTC was down about 0.7% and gold couldn't hold a $3 gain. Cash vols average.  

 

 

Sort of the flow I expected, but that still didn't help trading.  It was almost an anti-Friday.  No strong algo fingerprints - nothing really that I might call structure.  Tonight used to be an important bit of data (US non-farm) but these days it is also a bit random.  

Currencies flat across my session.  Crude still strong.  Lame-o.  

Thursday 12/3/2020

  • Market Strength 📈
  • Remembering that I AM THE HEDGE 📉
  • Some interesting sentiment Charts via The Bond King Van Metre 📊
  • @Sam Colt ’s “Enrichment” method for The Exchange (high value info)