On June 12, the rates market was fascinated with what was then described as an “unprecedented” vol trade: as Bloomberg described at the time, an unknown trader bought $10 million of out-of-the-money puts and calls on 10Y Treasury futs (i.e., a strangle) when the 10Y was yielding 2.38%, which immediately grabbed the market’s attention as it involved huge block trades of about 63,500 on either side: “a strangle of that magnitude is rare, and possibly unprecedented” according to several rates traders who spoke to Bloomberg.
The theta on the trade was so high that just to recoup the premium, the yield on the 10Y would have to rise or fall about 10 bps from 2.38%, and preferably very soon. Once the 10Y were to move beyond 10bps, gains were unlimited, and the trader “stands to gain about $50 million on a quarter-point move in either direction from the starting level, which would involve approaching this year’s highs and lows for 10-year yields.”
S&P affirmed Greece’s credit rating at B- but increased its outlook to positive from stable. The rating still reflects a severely depressed borrowing capacity but it’s a slice of good news as Greece thinks about launching bonds again.
There is talk they could attempt to raise money as soon as next week.
The Nasdaq string of higher closed was broken at 10 days. The index fell today by a modest -0.04%. The S&P and Dow were also marginally lower today.
The S&P is ending down -0.91 points or -0.04%. Yesterday the index also declined by a small amount (-0.02%). The closing value is 2472.54. The index managed to close above a topside trend line at 2470.51 after being below it for most of the trading day (the low reached 2465.06).
The Nasdaq string was broken but the index was only lower by -2.25 points or -0.04% at 6387.75. The low reached 6365.11 today. The high is near the close at 6388.77.
The Dow fell by -31.71 points, down -0.15% to 21580.07.
For the week, the Nasdaq led the charge higher. The Dow ended lower.