ZN (10-year bond) options

There seems to be decent liquidity on the ecbot for eletronic traders of these options. But I notice that the market is not, if this is the right word, deep -- meaning that there aren't a lot of strikes with quotes to chose from, nor many strikes with quotes in non-front months. Amm I mising something, expecting too much, have stumbled onto a common frustration in ecbot versus cbot? All of the above?

 

you're not missing anything. the shorter the maturity the less viable strikes.

you can chat me on yahoo when you want a quote or a better quote than what's shown. for example, you want to buy ecbot 10yr AUG105 call currently quoted at 23/27 then chat me and I will try to post a 26 offer for you to hit.

my ID is "makebidoffer"

 

I'd be careful. VERY illegal!

 

Ok. Couple questions to follow up.

1. Why is the aforementioned scenario illegal and for whom?
2. Why would someone do it? If they make the bid don't they have to follow through?
3. Any thoughts ever given @ the ecbot to half point strikes for the ZN options?

I'm generally looking @ ZN to collect premium, naked sales, when premium gets to small on the ES. Caveats?

Thanks in advance.

 

It's a pre-arranged trade. What's kosher in the OTC market is illegal on a U.S. futures exchange.

As for your secondary question, I have no idea if the CBOT is looking down the road to trade ZN opts in 128ths.

 

The CBOT will probably tighten the tick at some point in the near future. I'm surprised that in your example of the ozn option, the market wasn't tighter. At any given point in the day, there are groups posting their quotes on the electronic exchange which usually result in 2 tick wide, 10,000 up markets. As far as I've seen, the electronic treasury option markets are the most liquid of anything out ther right now if you're looking to do large orders.

 

Its not the tick spread, which is indeed tight. But the strike selections, 104, 105, 106, et-cetera, that are rather wide, no? How about a 104 1/2, 105 1/2, et-cetera?

 

As for the prearranged trade, why would somebody offer me a better bid that the ecbot?

 

The ECBOT niether bids nor offers. It's an EXCHANGE. Traders bid or offer. Why someone does or doesn't bid/offer is their business, eh? Why doesn't rosy tighten the market without being tipped off?

 

Pabst,

Could you tell me what Treasury option floor traders use to generate their price sheets? Is it a tweaked version of Black-Scholes? Grazie.