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On That $100 Billion Eurodollar Barbell Trade

Tyler Durden's picture




 

Something interesting happened earlier today in the much underappreciated eurodollar market. As the Bloomberg chart below shows, just before noon, someone aggressively sold 100,000 contracts of the March 90 day Eurodollar future. Why is this notable? Because at a contract size of $1MM per, this is effectively a $100 billion notional bet that the eurodollar price will decline over the next month. What does this mean in simple terms is that since the eurodollar price is determined as the difference for par in 3 month Libor, someone just put a very sizable bet (probably one of the biggest single Euro$ blocks traded in recent months) that Libor is due for a jump. Now Libor, traditional economists will say, is a function of monetary policy and a reflection of the short-end of the curve (remember the now forgotten TED Spread?) which is driven almost exclusively by the Fed Funds rate. It is also driven by exogenous risks to the credit system such as what happened when Lehman blew up and Libor hit the stratosphere. In other words someone just put down up to $100 million in capital at risk ($82.5 million to be specific) that over the next month (contract expiration assuming no roll, is March 14, 2011) we will see one of two things: a bullish economic development: a rate hike (or expectations thereof) in the US, or to a lesser extent the ECB, or a very bearish one, such as a bank collapse, along the lines of what the recently disclosed surge in MLF borrowings may be predicting - recall what happened to Libor when Lehman fell... In other words your traditional barbell trade. Either way, should this single trade be imitated in the next week, one can bet that the Eurodollar trade will suddenly become far more popular.

Note the 100k block at 11:59 am Eastern.

 

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Fri, 02/18/2011 - 16:35 | 975442 jus_lite_reading
jus_lite_reading's picture

Non-event. Nothing to see. This is moot. Watch Jersey Whore.

Sat, 02/19/2011 - 09:46 | 977207 French Frog
French Frog's picture

+1 jlr; obviously there are 3 people in here (so far) who know for sure (lol) what this trade means and they have decided to junk you for your 'less-than-understanding stance on this rather grave matter'.

Has anyone even bothered to think that it could simply be someone who had accumulated 100000 long March contracts since december from around 90.30 and has decided to close his trade(s) around 90.66 !?

Trust me, that is a nice little earner and it hasn't got a need for a "oh my god, there is something really big brewing in the background and no-one has a clue whether or not it is true but hey let's just throw it to the ZH masses anyway and see how many different theories we can get out of them"

Fri, 02/18/2011 - 16:36 | 975446 THE DORK OF CORK
THE DORK OF CORK's picture

Physical cash is looking attractive - I wonder do the CBs have the balls

Fri, 02/18/2011 - 16:36 | 975447 hungrydweller
hungrydweller's picture

Silver takes down the JPMorgue!

Fri, 02/18/2011 - 17:16 | 975564 I think I need ...
I think I need to buy a gun's picture

This is all adding up to a new monetary system shortly

Fri, 02/18/2011 - 17:20 | 975580 Hugh_Jorgan
Hugh_Jorgan's picture

I agree that this is in the works...

Anyone's guess when.

Fri, 02/18/2011 - 17:28 | 975613 sabra1
sabra1's picture

next wednesday, i'm getting a HAIRCUT on tuesday!

Sat, 02/19/2011 - 11:07 | 977286 Woodrox
Woodrox's picture

laughing... sabra1

Fri, 02/18/2011 - 21:53 | 976374 mr66
mr66's picture

RE: Sil ver taking down

JP morgue.....if so, then why isn't the stock tanking?

Fri, 02/18/2011 - 16:36 | 975448 TheGreatPonzi
TheGreatPonzi's picture

This guy has seen the face of the Portuguese and Italian bonds, that's all. 

Fri, 02/18/2011 - 16:38 | 975449 Yen Cross
Yen Cross's picture

I shorted the eur/usd into Europe and set a hedge. The trade worked out well. If had walked away from it or taken a nap, my ass would have been handed to me. EUR/YEN spiked as well.

Fri, 02/18/2011 - 16:37 | 975450 superman07
superman07's picture

fat finger

Sun, 02/20/2011 - 18:49 | 980264 let-them-eat-cake
let-them-eat-cake's picture

Weather balloon?

Fri, 02/18/2011 - 16:39 | 975451 Alienated Serf
Alienated Serf's picture

Let me just add this; if anyone think LIBOR is an actual realistic measure of interbank lending rates, you are smokin some good ish.  I'm surprised Tyler hasn't dug up some dirt on what a joke it is... or maybe he has and I haven't seen it...

Fri, 02/18/2011 - 16:54 | 975479 Hephasteus
Hephasteus's picture

Libor is simply a magician putting the gold lease rate in a hat GOFO. So this article is kind of really correct. As gold will be going ape shit next month from what I'm seeing.

Fri, 02/18/2011 - 16:56 | 975503 Alienated Serf
Alienated Serf's picture

i'm not making any comment on what this articel really means, as it is "above my paygrade."  all i'm saying is, do you think a bunch of primary dealers voluntarily stating what rate they could get a loan at from each other with no verification is accurate?  you think TPTB would get mad if LIBOR scared the sheeple?  its a major benchmark with no transparency.

Fri, 02/18/2011 - 20:12 | 976119 Hephasteus
Hephasteus's picture

Well ya. It is basically meaningless. If the banks want to loan to each other no matter what the risk they won't raise it. So it just depends on how willing each participant is to handle the blowback of whatever state they are central banking over.

Fri, 02/18/2011 - 21:58 | 976389 Alienated Serf
Alienated Serf's picture

the central banks order it to remain low to keep anyone from knowing how bad things are.  national security and all...

Fri, 02/18/2011 - 16:38 | 975454 NOTW777
NOTW777's picture

"a rate hike (or expectations thereof) in the US"

hard to imagine; if i had to gamble, I'd rule that out

Fri, 02/18/2011 - 16:39 | 975455 Caviar Emptor
Caviar Emptor's picture

I noticed that, was tempted. Someone knows something about liquidity shortage in Euroland, my guess. 

Fri, 02/18/2011 - 16:40 | 975457 Sophist Economicus
Sophist Economicus's picture

Large move - CB/surrogate rope-a-dope?   Another way to get folks to correlate with various shorting strategies to feed risk rise?  Hmmm...

Fri, 02/18/2011 - 16:42 | 975463 NOTW777
NOTW777's picture

how many entities can make a bet of this size?

Fri, 02/18/2011 - 17:00 | 975513 HoofHearted
HoofHearted's picture

I know of one guy..."Zimbabwe" Ben Bernanke. 

Fri, 02/18/2011 - 23:30 | 976623 Reptil
Reptil's picture

gooooooood question.

anyone??

Sat, 02/19/2011 - 11:51 | 977331 snowball777
snowball777's picture

Anyone with 100 million FRNs.

Eurdollar contract margins are about $1k/contract and they bought 100,000 of them.

Fri, 02/18/2011 - 16:43 | 975465 Horatio Beanblower
Horatio Beanblower's picture

Does Julian Assange have a Bloomberg Terminal?

Fri, 02/18/2011 - 16:43 | 975466 TooBearish
TooBearish's picture

$100 billion notional bet that the eurodollar rate will decline over the next month

 

sold contracts betting rate will decline?  Huh? - Ty its beens along week take the rest of the day off bro

Fri, 02/18/2011 - 16:47 | 975474 Tyler Durden
Tyler Durden's picture

Price => Libor rate

Fri, 02/18/2011 - 16:50 | 975481 TooBearish
TooBearish's picture

Good edit - thanks fer the info market ate it up though.....

Fri, 02/18/2011 - 16:55 | 975501 Hephasteus
Hephasteus's picture

So what do you think tyler. Euro dump the piigs? But it's gotta eat some of the piig debt to do it and drop in value big time?

Fri, 02/18/2011 - 17:00 | 975512 Alienated Serf
Alienated Serf's picture

LIBOR=> completely fictitious number dictated to "self reporting" banks.

Fri, 02/18/2011 - 16:47 | 975475 TheGreatPonzi
TheGreatPonzi's picture

This is called a short. 

Fri, 02/18/2011 - 17:19 | 975577 TooBearish
TooBearish's picture

Watch OI report from CME tomorrow to tell if it is or not.

Sat, 02/19/2011 - 11:55 | 977337 snowball777
snowball777's picture

I am inclined to agree...someone is trying to be 'stealthy' about their borrowing.

Fri, 02/18/2011 - 16:45 | 975471 primefool
primefool's picture

Coupled with the huge spike in the Euro today - it sure smells like some european banks/hedge funds whatever are in bad trouble and very short of liquidity. The spike in ECB borrowings also ties in.

Next week should get very interesting.

Astonishing complacency in the markets going into a 3 day wekend - with the entire middl e east in turmoil, possible bank problems in Europe etc. I guess people who are playing with other peoples money with the Fed covering - feel no pain or anxiety.

Fri, 02/18/2011 - 17:03 | 975523 Racer
Racer's picture

That's cos there is NO risk in the market, the Fed has the banksters backs covered no matter what

Fri, 02/18/2011 - 16:50 | 975482 superman07
superman07's picture

soros ?

 

Fri, 02/18/2011 - 17:01 | 975517 Nepenthe
Nepenthe's picture

My first thought. I'd guess someone knows one of the piigs is about to turn turtle...

Fri, 02/18/2011 - 18:20 | 975754 hardcleareye
hardcleareye's picture

"This Sunday, February 20th, George Soros will appear on GPS with Fareed Zakaria.
 
In the interview George talks about the situation in the Middle East and reflects broadly on the nature of revolutions. He also discusses the state of the US economy and prospects for the future. "

Fri, 02/18/2011 - 16:53 | 975491 Racer
Racer's picture

And rumour of AAPL bidding for NFLX   ha ha ha ha ha ha ha

Fri, 02/18/2011 - 16:53 | 975493 falak pema
falak pema's picture

I think this is Mubarak's ghost. He wants to pay back USA for letting him pick up his paycheck after eighteen days of dilly dallying allowing him to move his bullion to safety. Its the least he can do.

Fri, 02/18/2011 - 16:54 | 975495 BaronG
BaronG's picture

Not sure if the two are related, but we use Wells Fargo as custodian for a few hundred million and all of a sudden yesterday Wells let us know that our clients are no longer able to open lines of credit, which are tied to the Libor. There wasn't any explanation given as to why the sudden change and nothing posted on the internal site.

 

 

Fri, 02/18/2011 - 17:02 | 975519 Yen Cross
Yen Cross's picture

That's interesting. Thanks for the tidbit.

Fri, 02/18/2011 - 17:26 | 975603 Arkadaba
Arkadaba's picture

WFC - next sacrificial lamb?

Fri, 02/18/2011 - 16:55 | 975498 Ragnarok
Ragnarok's picture

TD,

OT: Gallup Finds U.S. Unemployment Up to 10.0% in Mid-February

 

http://www.gallup.com/poll/146147/Gallup-Finds-Unemployment-Mid-February...

Fri, 02/18/2011 - 16:57 | 975505 falak pema
falak pema's picture

It could also be Khadafi who has just lost Benghazi to the mob. He's moving his heavy artillery in USD. Out and short on Eur$

Fri, 02/18/2011 - 16:59 | 975509 primefool
primefool's picture

This Euro currency move looks very artificial to me . Seems Mr Smaghi is simply talking tough as he must to get Weber's post. The Germans like tough talking CBers. Maybe the Chinese are trying to send a msg to Bennie to please please stop the BS? Who knows.

Fri, 02/18/2011 - 17:25 | 975597 pbnyc
pbnyc's picture

This is not a "euro currency" move, the Eurodollar contract has nothing to do with the Euro.

Fri, 02/18/2011 - 16:59 | 975511 TradingJoe
TradingJoe's picture

I am not as complacent as the rest of the "bunch"!

I do believe that politicians will do what is good for them, fuck the status quo, etc.!

Its not about the FEDs' "balls" or not,

its about the necessity, being forced to, by what ever events!

At that point WS is going to be really fucked or already in the loop!

Either way, buying some LEAP PUTS isn't a bad idea, eh?!

Fri, 02/18/2011 - 17:17 | 975565 whatsinaname
whatsinaname's picture

Leaps ? Think more like 2013 dealing with these jerks with stolen fiat money.

Fri, 02/18/2011 - 17:20 | 975579 TradingJoe
TradingJoe's picture

YEP! Those are the ones i'm talking about! Start small, few contracts here and there, as the "market" grinds higher you lay a few more in and so forth, this way you won't miss the big kaboooooom! :))

Fri, 02/18/2011 - 17:03 | 975521 Quinvarius
Quinvarius's picture

Or someone who had been betting on a strong dollar, like all the other sheep who seem to believe we can print without debasing, just blew up.

Fri, 02/18/2011 - 17:07 | 975537 THE DORK OF CORK
THE DORK OF CORK's picture

The dollar has been debased for 40 years  - you just have the privilege of a world reserve currency - so your defecits are our problem.

Fri, 02/18/2011 - 17:14 | 975549 Quinvarius
Quinvarius's picture

Your Treasuries will be just fine...in dollar terms.  You should be able to swap a 30 year for a pack of gum when this is all over.  But it will still pay out at face value.  So no complaining.

Fri, 02/18/2011 - 17:19 | 975569 THE DORK OF CORK
THE DORK OF CORK's picture

I am not 100% sure anymore - the middle east is looking very shaky - so Europe seems reluctant to go freegold and deprive the dollar of reserve status and therefore its ability to project.

 

Everything could burn relative to the dollar and I mean everything although I am not sure will it be hot enough to melt gold

The MMT boys are not over by a long shot.

Fri, 02/18/2011 - 17:31 | 975622 Arkadaba
Arkadaba's picture

And the SDR is being presented as a fait accompli everywhere but the USA:

http://www.financialpost.com/news/Flaherty+seeks+bigger+role+Canadian+dollar/4310889/story.html

Fri, 02/18/2011 - 17:36 | 975633 Quinvarius
Quinvarius's picture

The SDR is a pile of crap.  I don't even get the logic behind it or how any economist can take it seriously.  All the fiat is garbage.  So if we make a derivative based off of a mix of fiat, we can use that as money?  It doesn't make any sense to me.

Sat, 02/19/2011 - 01:34 | 976893 Unbeliever
Unbeliever's picture

The SDR is not about money; it's about power.

Sat, 02/19/2011 - 11:57 | 977344 snowball777
snowball777's picture

Does your stance change at all if Au (or other popular commodities...*cough* oil *cough*) is included in the basket?

 

Fri, 02/18/2011 - 17:09 | 975541 Yen Cross
Yen Cross's picture

 Funny you mention that. Looks like 77.20 followed by the 76.80 area next. The histogram on the DXY chart H-1 is well below the zero line and the macd/ma crossover is still looking southward.

Fri, 02/18/2011 - 17:18 | 975567 TradingJoe
TradingJoe's picture

DXY will re test the 75.63 area before it eventually makes a bounce attempt, the guy with the trade just wanted to be "early in", hehehe!

Fri, 02/18/2011 - 17:26 | 975608 Yen Cross
Yen Cross's picture

A fellow chartster. Nice to make your aquaintance!

Fri, 02/18/2011 - 17:05 | 975530 arkady
arkady's picture

A bullish economic development insofar that we desperately need a rate hike, but a rather bearish event for a market addiction to liquidity. 

Fri, 02/18/2011 - 17:06 | 975531 pazmaker
pazmaker's picture

so they are betting the euro is going to crush the dollar?

Fri, 02/18/2011 - 17:09 | 975542 falak pema
falak pema's picture

What if its....looking for ghosts...

Fri, 02/18/2011 - 17:12 | 975551 ZeroPower
ZeroPower's picture

What kinda leverage you think they got? 100:1 ? $1bn sounds 'reasonable'  - moreso than 100bn.

Fri, 02/18/2011 - 17:29 | 975617 Yen Cross
Yen Cross's picture

I trade 100:1 in my currency trades. It's all about margin management. Not CFTC nazi pukes, and FIFO/ leverage terms.

Fri, 02/18/2011 - 21:24 | 976306 RoRoTrader
RoRoTrader's picture

Eurodollars were the forerunner of Russian glasnost so the leverage is beyond comprehension.

Nonetheless, last time I looked Eurodollar futures were a proxy not only for interbank lending rates but also a proxy for lending rates from A to Z and credit cards.

ZeroPower put it in the Marginal Lending Facility article; This is not the liquidity crisis you're looking for.

http://www.zerohedge.com/article/acute-liquidity-crisis-europe-confirmed...

If not a bank failure then it has to be a new price basis and the cost of that money since shorting EuroDollars implies higher rates.

Engineering and stablishing a new price basis across the spectrum has probably been the the FED's intention all along.

 

Fri, 02/18/2011 - 21:32 | 976329 Orly
Orly's picture

"Engineering and establishing a new price basis across the spectrum has probably been the the FED's intention all along."

What does this mean?  Revaluing the Euro?

Fri, 02/18/2011 - 23:57 | 976503 RoRoTrader
RoRoTrader's picture

In short form I think it means an escape from the desert/or reality for the banks, and another generational transfer of wealth void of inheritance taxes.

Think in terms of the sociopath mind delivered by a talented and gifted orator who has been paid for; But, you know, economics is really all so complex that unless you have been to Harvard or Cambridge then in essence it comes down to I can thieve from you because you are really innocent (stupid), but by the time I am finished robbing you blind, and loving the pleasure of it thank you very much, nonetheless in the end you will feel grateful for what I have returned to you in kind.

Get it?

In other words this is the kind of animal that has the ability to twist and transcend just about everything.

 

 

 

 

 

Fri, 02/18/2011 - 17:16 | 975563 Hugh_Jorgan
Hugh_Jorgan's picture

Well hello, Mr. Sata...er Soros!!

Fri, 02/18/2011 - 17:20 | 975572 Convolved Man
Convolved Man's picture

Surely the outlook of Egyptian military control over the Egyptian economy and banking must be rippling through European Banks.  The Mubarak investment portfolio unwinding?

Fri, 02/18/2011 - 17:22 | 975585 4all5
4all5's picture

Does anybody posting here really have a clue??? Everything is so manipulated that there really is no market...

Fri, 02/18/2011 - 17:24 | 975595 Modus
Modus's picture

tyler is totally right. one better first understands how eurodollar futures work before making a point...

price of futures contract declines: implied rise of 3-month libor

price of futures contract rises: implied decline of 3-month libor

 

two questions though

1. although prices moved down, how can one be so sure that this was all selling?

2. how is that trade related to the move in eurusd and the surge in the 10year note?

 

cheers

 

 

Fri, 02/18/2011 - 17:24 | 975596 falak pema
falak pema's picture

Well one things for sure the traders make their margins win or lose...

Fri, 02/18/2011 - 17:59 | 975709 Yen Cross
Yen Cross's picture

Amen brother. Well said. Some poeple trade with stops, and some people love to trade with out stops. I love to trade!

Fri, 02/18/2011 - 17:25 | 975600 raya123
raya123's picture

A sharp drop in the euro will absolutely bring down the equities markets into March and April.

Fri, 02/18/2011 - 17:26 | 975606 joneog
joneog's picture

It doesn't look like the trade was immediately spread in the June, Sep, Dec '11... but there was solid buying in those after the 100k block so maybe it was offset.  Propably part of a more complex trade or someone hedging their rate risk.

If the seller thought we might get a shift in policy or rhetoric they probably would have sold further out (and certainly not spread it further out)... unless they know something is gonna happen soon over in Europe.  Could have something to do with why the EUR is up a bunch today. 

Fri, 02/18/2011 - 17:31 | 975616 Pure Evil
Pure Evil's picture

"Note the 100k block at 11:59 am Eastern"

Just somebody trying to show the powerful effect of Extenze!

The one little pill that can make a huge difference.

http://www.extenze.com/

*/shlong-My trade is bigger than your trade/*

Fri, 02/18/2011 - 17:30 | 975619 falak pema
falak pema's picture

There is news from the G20 in Paris that China has given secret assurances to EUR market to support bond attacks from USA if they are not made subject to the currency marker constraints that Sarkozy wants the Chinese to adopt concerning Yuan monetary control and 'transparency'. This is coming on the heels of intense bargaining in Paris...smells fishy.

Fri, 02/18/2011 - 17:37 | 975638 Orly
Orly's picture

Is it possible that it could also mean that massive amounts of US dollars are going to be repatriated over the next thirty days from Europe?

That would answer Bruce Krasting's question.

Fri, 02/18/2011 - 17:52 | 975683 Yen Cross
Yen Cross's picture

 That should be dollar positive. Repatriation pays the debt down. Theorectically. It's still too early for month end flows anyways.

Fri, 02/18/2011 - 17:57 | 975702 Orly
Orly's picture

But the removal would greatly disturb the Libor, wouldn't it?  Isn't the article saying that there would just something big to happen and that would be all that is necessary?

Fri, 02/18/2011 - 18:05 | 975727 Yen Cross
Yen Cross's picture

 There are a lot of axioms to take into account there. Removing USD from the system isn't likely the cause. It's disconnection, and lack of transparency. No one little Piiglet want's to admit a wrong.  Before you know it, there is a a bunch of piiglets running around in chaos. The ECB is trying to play farmer. BIS has a big hand in it as well. Cheers.

Fri, 02/18/2011 - 19:50 | 976049 Orly
Orly's picture

Then that would imply that the EuroYen cross is going into the tank over the next couple of weeks?

Fri, 02/18/2011 - 17:39 | 975645 pbnyc
pbnyc's picture

Maybe someone was long and closed out their position?

Maybe someone rolled? Following that trade there were some big trades in the M1 and U1 contracts.

Fri, 02/18/2011 - 17:53 | 975689 Wood
Wood's picture

So...is this why they closed the market early today?  My quotes say closed but it ain't 4 o'clock yet.

Fri, 02/18/2011 - 18:03 | 975721 hardcleareye
hardcleareye's picture

The acrium MLF should have another mean for those with lots of gray hair, it was Multilateral Force a proposal to produce a fleet of submarines and warships, each manned by international NATO crews, and armed with nuclear ballistic missles.  Hence the song The MLF Lullaby......

http://www.youtube.com/watch?v=wB7PRY1Aqds&feature=related

Fri, 02/18/2011 - 18:26 | 975770 bob_dabolina
bob_dabolina's picture

This has Waddell and Reed written all over it.

Fri, 02/18/2011 - 18:29 | 975782 jus_lite_reading
jus_lite_reading's picture

Must. Close. Markets.... ahhhhhhhhhhhhhh! GREEN SHOOTS...

What a f$%ing house of cards!

Fri, 02/18/2011 - 18:29 | 975787 sgorem
sgorem's picture

"or a very bearish one, such as a bank collapse, along the lines of what the recently disclosed surge in MLF borrowings may be predicting - recall what happened to Libor when Lehman fell... " eggsactly. thanks Tyler, you da man dude.

Fri, 02/18/2011 - 18:55 | 975897 Wood
Wood's picture

From the CME rulebook (Chapter 452).  How LIBOR is related to Eurodollar futures:

45203.  Settlement Procedures

Delivery shall be by cash settlement.

45203 A.  Final Settlement Price

The final settlement price of an expiring contract shall be 100 minus the three-month Eurodollar interbank time deposit rate determined at the British Bankers' Association (BBA) LIBOR fixing on the second London bank business day immediately preceding the third Wednesday of the contract's named month of delivery.  The value of such three-month Eurodollar interbank time deposit rate shall be rounded to the nearest 1/10,000th of a percentage point per annum.  Tie values, ie., any such value ending in .00005 shall be rounded up.  For example, a Three-Month BBA LIBOR fixing value of 8.65625 percent would be rounded up to 8.6563 percent, and then subracted from 100 to determine a contract final settlement price of 91.3437.

end of quote.

Eurodollars are dollar deposits in banks that are outside the US.  Their rates closely track the Fed's rates in times of calm due to the ability to arbitrage them with US domestic rates. Eurodollar (LIBOR) rates that diverge significantly from US domestic rates indicate illiquidity in non-US short-term money markets. 

The history of Eurodollars is very interesting.

Fri, 02/18/2011 - 18:56 | 975901 Translational Lift
Translational Lift's picture

Should be an interesting week-end...........

DuntaDuntaDuntaDuntaDuntaDunta............

Fri, 02/18/2011 - 20:08 | 976102 Just_Another_User
Just_Another_User's picture

Sorry, I don't get this - in the sense that;why don't we see a large price spike @ the time of the trade on eur/usd?

I see the vol spike (11:57am est) but not price.

Anyone?

Fri, 02/18/2011 - 20:26 | 976156 pbnyc
pbnyc's picture

Why should EUR/USD move on a Eurodollar move?

Fri, 02/18/2011 - 23:06 | 976561 Just_Another_User
Just_Another_User's picture

wasn't sure if there should (or would) be a relationship between the two.

thanks!

Fri, 02/18/2011 - 20:40 | 976191 Buck Johnson
Buck Johnson's picture

This person or person's wouldn't put up 100 million on a hunch or even a researched hunch or guess.  He or they are an insider to something that may come out this weekend or next week, and that could be a major EU bank going into financial insolvency.  There has been a spike up the last 2 nights of a banks needing emergency cash. 

 

http://www.cnbc.com/id/41669140

Fri, 02/18/2011 - 21:23 | 976307 Orly
Orly's picture

This is getting so beyond crazy.

Sat, 02/19/2011 - 00:10 | 976711 prophet
prophet's picture

"What does this mean in simple terms..."

Greatly appreciate your extra effort to explain this.  Kudos to Wood too.

Sat, 02/19/2011 - 12:26 | 977390 DeadFred
DeadFred's picture

Consider changing your name (but keep the icon cute icon).  Soros has his minions read this site.  Fly under the radar.

Sat, 02/19/2011 - 00:27 | 976747 Poor Grogman
Poor Grogman's picture

I leave it to zero hedge readers.  Are these dots connected???

Silver breaks $30.00

A HUGE short position takes massive losses.

Billions are borrowed short term in Europe  (Margin Call)?

Some sort of huge hedge is entered into in Euro's

That is all I have, mere speculation.

BTFD chaps!

 

 

 

Sat, 02/19/2011 - 07:48 | 977125 DeltaFunctionToronto
DeltaFunctionToronto's picture

My two cents:

This screams a rising 10yr rate is around the corner.

What concerns me, however, is the position size. It's not the same as a feel-good order after you've pulled a pretty blonde UK number. It's a "someone is barrelling down the autobahn and has lost control at 250km/h, perhaps I should step out of the way" order.

 

 

Sat, 02/19/2011 - 08:27 | 977142 pcrs
pcrs's picture

in the futures market, when someone puts out a bet on the long side, someone else takes it on on the short side, so it is hard to give a direction to it. It reminds me of the time halve a year ago when someone put out a very big bet that the ^vix would go up. That was seen as some sort of inside knowledge. The vix never went up after that, he lost a lot of money and some others won a lot of money.

It's is not certain that the few who make a big bet know more than the many who take the other side

Sat, 02/19/2011 - 08:27 | 977143 pcrs
pcrs's picture

in the futures market, when someone puts out a bet on the long side, someone else takes it on on the short side, so it is hard to give a direction to it. It reminds me of the time halve a year ago when someone put out a very big bet that the ^vix would go up. That was seen as some sort of inside knowledge. The vix never went up after that, he lost a lot of money and some others won a lot of money.

It's is not certain that the few who make a big bet know more than the many who take the other side

Sat, 02/19/2011 - 11:03 | 977281 mnzcme
mnzcme's picture

Open interest in EDH1 fell by 46k contracts.  Conclusion is that someone exited long position.  It is not a big deal.  Three mo libor is setting 0.3125.  Equivalent EDH1 price is 99.6875.  The trade in question was at 99.67 to 99.6725.  Recent range (for past 2 months in this contract is 99.62 to 99.675.  If an individual sold 1000 contracts, the notional value is $1 billion.  Sounds like a lot, but risk would probably be to 99.700 if LIBOR falls slightly to 30 bps.  A move from 99.67 to 99.70 would represent a loss of $75000.  Sure, it's a lot of money, but many individuals could trade this size.  Is it a "fat finger"? No.  Does it represent an outright bet that funding pressures are going to flare up? No.  It is someone exiting a trade. 

Sat, 02/19/2011 - 12:31 | 977393 Downtoolong
Downtoolong's picture

someone just put down up to $100 million in capital at risk

 

It was Benny. Benny did it, I swear I saw him do it officer. I swear I tells ya, it was Benny.

 

 

Sat, 02/19/2011 - 14:40 | 977604 Money 4 Nothing
Money 4 Nothing's picture

Would this be a "see something say something" moment? 

Sat, 02/19/2011 - 15:48 | 977740 pcrs
pcrs's picture

rat on your central bankster

Mon, 02/21/2011 - 05:42 | 981081 propellerhead
propellerhead's picture

COT from 2/15/11.. 

 

Actual COT numbers with the sources cited.. looks like someone closing some positions in the O.I. http://www.cftc.gov/dea/futures/deacmesf.htm3-MONTH EURODOLLARS - CHICAGO MERCANTILE EXCHANGE Code-132741 FUTURES ONLY POSITIONS AS OF 02/15/11 | --------------------------------------------------------------| NONREPORTABLE NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS --------------------------|-----------------|-----------------|----------------- LONG | SHORT |SPREADS | LONG | SHORT | LONG | SHORT | LONG | SHORT -------------------------------------------------------------------------------- (CONTRACTS OF $1,000,000) OPEN INTEREST: 8,886,901 COMMITMENTS 739,452 627,140 1319875 5995956 5930277 8055283 7877292 831,618 1009609 CHANGES FROM 02/08/11 (CHANGE IN OPEN INTEREST: 202,881) 19,007 1,641 -18,461 151,468 127,317 152,014 110,497 50,867 92,384 PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS 8.3 7.1 14.9 67.5 66.7 90.6 88.6 9.4 11.4 NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 267) 55 58 90 122 137 238 235 http://www.cftc.gov/files/dea/cotarchives/2011/futures/deacmesf020811.htm3-MONTH EURODOLLARS - CHICAGO MERCANTILE EXCHANGE Code-132741 FUTURES ONLY POSITIONS AS OF 02/08/11 | --------------------------------------------------------------| NONREPORTABLE NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS --------------------------|-----------------|-----------------|----------------- LONG | SHORT |SPREADS | LONG | SHORT | LONG | SHORT | LONG | SHORT -------------------------------------------------------------------------------- (CONTRACTS OF $1,000,000) OPEN INTEREST: 8,684,020 COMMITMENTS 720,445 625,499 1338336 5844488 5802960 7903269 7766795 780,751 917,225 CHANGES FROM 02/01/11 (CHANGE IN OPEN INTEREST: 342,023) -158,358 5,011 195,076 377,249 104,380 413,967 304,467 -71,944 37,556 PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS 8.3 7.2 15.4 67.3 66.8 91.0 89.4 9.0 10.6 NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 273) 52 62 94 119 135 237 242Perhaps this could shed some light on the position from week to week.

 

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