The Credit Crisis Financial Stocks Short Journal

Quote from ralph00:

The Eurodollar options have moved up impressively in price the past couple of weeks. Are you tempted to take any profits? I'm used to a sawtooth world, but E$'s only seem to move in one direction lately! There has to be a 75 point pullback out there soon, one would think.
More...

I've been thinking about it but for a different reason. I'm not too worried about short-term movements. I am worried about this sudden correction in financial stocks and bonds that never comes, the longer it takes to get there the more likely it seems that by Dec 2010 there still be stress in the system(as there will be less time for repairing). So i've been considering putting a Libor-OIS stop in that trade

http://www.bloomberg.com/apps/quote?ticker=.LOIS3:IND

If that goes to 0.18-0.20 I will seriously consider trimming the position as that might indicate libor is in for a upswing.
I'm particularly concerned over the possibily of serious widening of bank CDS spreads and that infecting libor. The huge odds from a few months ago in the calls are gone so now I dont have as big as margin of safety

But its possible that libor wont go up huge like during the 2008 crash, in the bank scare from Jan-Mar, it went up by only 25bps, even though Citi debt was trading at 25% YTM at some point
 
With the benefit of hindsight, I should have held on to my GE Dec 2010 calls, and put in place a Libor-OIS "stop" in place, just as you suggested.

Having said that, I've done very well with my (long gold + short S&P 500) pair in the last 2 months.

In a similar vain to your GE calls trade, although good gains have been made so far, I am holding the position with the view that it will continue to move in my favor.
 
Quote from ralph00:

I'm less worried about a jump in that spread than I am that a 'fed tightening scare' will enter the markets.
More...

Well, take a look at the implied Libor-OIS spread for the dec range.
I'm my math is correct(and Martinghoul could help on this), the market is implying a 18bps Libor-OIS spread

3M Libor
GE Dec 2010 98.8650
OIS(3M Expected Fed Funds)
ZQ Jan 2011 99.1650
ZQ Feb 2011 98.9959
ZQ Mar 2011 98.9000
Avg 99.05
99.05 - 98.8650 = 18.5bps
Perhaps I need to add the Dec 2010 ZQ with a 50% weighting or something?Martin?

That is not a lot, I remember it was 40bps a while back. People were demanding a premium to hold back end E$, now it seems that no one is worried, that gets ME worried
 
Well, FRA/OIS for IMM dates is quoted in the mkt directly...

According to the screens, current mids are as follows for whites and reds:
Dec9 12
Mar10 15.13
Jun10 17.75
Sep10 18.25
Dec10 21.88
Mar11 21.25
Jun11 21.25
Sep11 21
 
Quote from Martinghoul:

Well, FRA/OIS for IMM dates is quoted in the mkt directly...

According to the screens, current mids are as follows for whites and reds:
Dec9 12
Mar10 15.13
Jun10 17.75
Sep10 18.25
Dec10 21.88
Mar11 21.25
Jun11 21.25
Sep11 21
More...

Do you have a chart for the Mar11?It appears they are at the lows of the year
 
Quote from Daal:

Do you have a chart for the Mar11?It appears they are at the lows of the year
More...
Attached is the chart of the FRA/OIS for the 6th rolling Eurodollar contract (i.e. it's the Mar11 only for the few months recently)...
 

Attachments

Quote from ralph00:

The spread is up a couple of tics.

Is the sell-off here an opportunity to cover the GE calls or the start of something bigger ...
More...

Where did you get your data?Looking at the bloomberg site it doesnt show movement at all
 
You must log in or register to reply here.
Back
Top