Options Traders Are Putting a March Fed Rate Hike Back in Play 

Edward Bolingbroke | Bloomberg | Jan 9th, 2019
Category: Financial News

  • Dovish bets in March 2019 eurodollar options exited en masse
  • Rate-hike wagers creep back into OIS curve for coming year

Bets that the Federal Reserve will raise rates again in March, which virtually disappeared from U.S. interest-rate options markets last month, are making their way back.

While traders are still nowhere near pricing in a full rate increase, some of the more dovish bets have been unwound in recent days. Most notably, CME Group’s open interest data for Tuesday confirmed an exodus from March 2019 eurodollar calls struck at 97.375 -- a component of several structures set up to profit from a dovish shift by the Fed. Open interest in the strike shrank by 177,688 contracts, or nearly 28 percent. And open interest increased in December 2019 put strikes involved in a structure targeting a more hawkish Fed policy path.

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