I think Euribors have woken up big time this year, this is the fourth day of mega volume, with well over 2 million contracts traded along the strip. The burst of action was brought about by an ECB announcement that banks were to repay EUR 137.2 Bln of 3y LTRO on Jan the 30th. This is significant as it signals increased confidence among banks on conditions in Europe.
Bonds dropped off a cliff as the announcement came out with heavy volume accompanying the news. The ensuing volatility continued for a good 3 hours post the move, which provided many trading opportunities, although it was very tricky and easy to get done at the same time.
Below is the Jun14 Euribor chart.
As you can see the volume for the rest of the day was significantly higher for the rest of the day.
Although the obvious trade would be to short, I stuck to trading the spread today, as I wasn't too aware of the magnitude of the reaction of this data. Spreads on the most part were steady in the red months, but we rose in the front months before coming off again in the afternoon. Mar14Jun14, was trading 6s in the morning, went to as high as 7.5s before settling at 6.5s/7s. By sticking to the ranges it worked out well.
We also had poor UK GDP figures, which affected Cable primarily, as equities continue to go higher regardless!
Today was one of my most busiest trading days, with the continuous action meaning I didn't have time for lunch! After taking a loss initially on the move I manged to recover it.
I've attached a screenshot of the composition of my trades today in Euribor for those interested.
Lets hope for more of this volume!
Bonds dropped off a cliff as the announcement came out with heavy volume accompanying the news. The ensuing volatility continued for a good 3 hours post the move, which provided many trading opportunities, although it was very tricky and easy to get done at the same time.
Below is the Jun14 Euribor chart.
As you can see the volume for the rest of the day was significantly higher for the rest of the day.
Although the obvious trade would be to short, I stuck to trading the spread today, as I wasn't too aware of the magnitude of the reaction of this data. Spreads on the most part were steady in the red months, but we rose in the front months before coming off again in the afternoon. Mar14Jun14, was trading 6s in the morning, went to as high as 7.5s before settling at 6.5s/7s. By sticking to the ranges it worked out well.
We also had poor UK GDP figures, which affected Cable primarily, as equities continue to go higher regardless!
Today was one of my most busiest trading days, with the continuous action meaning I didn't have time for lunch! After taking a loss initially on the move I manged to recover it.
I've attached a screenshot of the composition of my trades today in Euribor for those interested.
Lets hope for more of this volume!
Good money trading the volatility in euribor spreads. What about butterflies, do you trade them?
ReplyDeleteYeah I trade butterflies sometimes also although i primarily focus on calendars, as its just easier
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ReplyDeleteI used to trade flies following the mean reverting logic, taking good levels and waiting for the comeback. Ultimately all I make through calendars is to compensate the losses from flies... they are pushing higher, going into positive some of them. Until now, back spreads were priced higher than the front ones... but looks like something is changing. For instance: H14Z14 is higher than M14H15...
ReplyDeleteThe cause is obvious: euribor outrights of late 2014 fell more than the other ones, so flies starting in H14 or M14 went up while flies in the back starting in H15 or M15 went down on Friday... I'm looking forward to see whether it was an overreaction in that part of the curve or whether the euribor curve is actually changing.
Keep up the good work!
Interesting analysis I see this also! Either way just the increased activity in euribor is making me happy...lol, so not complaining!
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