On Tuesday, someone ponied up almost $10 million to buy out-of-the-money put and call options simultaneously on 10-year Treasury futures, in what’s known as a strangle, according to data compiled by Bloomberg and observations of trading levels. The position caught the market’s attention because it involved block sizes of about 63,500, according to CME Group Inc. data. A strangle of that magnitude is rare, and possibly unprecedented, say rates traders familiar with the market. The strategy, which expires July 21, looked promising Wednesday, when Fed Chair Janet Yellen’s testimony sent the 10-year yield down as much as six basis points. But the decline came to a halt after the Bank of Canada hiked rates as expected. Turbulence Needed Therein lies the challenge for this trade: Small swings won’t cut it. Just to recoup the premium, the 10-year yield would have to rise or fall about 10 basis points from about 2.38 percent, according to data compiled by Bloomberg. Once it passes that point, there’s no cap to the potential profit. For example, it 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. https://www.bloomberg.com/news/arti...0-million-that-volatility-revival-is-imminent So, are we finally going to rock that building called "bond super cycle"?
Someone always knows something; big, or so-called smart, money...doesn't gamble, The SEC, just like Cops, only hit the tip of the iceberg -- there's a whole plethora of stuff below that doesn't get reported or captured,
Bond volatility has been artificially suppressed for quite a while. Long vol is the equivalent to inverse fund trading. I'm not confident enough to get leveraged on vol due to factors outside of normal pricing, but forward valuation of options are getting historically out of the norm. You might just be on to something
It's odd the amount of "noisy trading" we've seen recently. That first Friday sell-off in tech, the gold "fat-finger" now this highly visible bet on short-term vol. Clearly all the traders behind these moves wanted them to be seen...
Maybe it was a risk reversal.... buy put sell call... or vice versa. You can't know... Risk reversal is basically a hedge on a directional underlying holding... the trader might be long treasuries and decides to trade this as a hedge... Again, Bloomberg making up a story about nothing.