A Fistful of Eurodollars

Published on
July 29th, 2019
7 minutes

A Fistful of Eurodollars

The One Thing ·
Featuring AK

Published on: July 29th, 2019 • Duration: 7 minutes

When a hedge fund legend tells you how he's planning to make money, it pays to listen up. And in a recent interview on Real Vision, John Burbank, CEO of Passport Capital, told Alex Gurevich of HonTe Investments that's he's playing the eurodollars market by using options. So what does that actually mean, and how can others can get involved in the trade? AK breaks it down.



  • gb
    garrett b.
    2 November 2019 @ 21:35
    I don't believe this trade is on the table any longer
  • JL
    Jose L.
    24 August 2019 @ 17:18
    ETrade and TD Ameritrade both charge a $6.95 base fee + $0.75 or $0.50 (depending on the #of trades made in a certain period). https://us.etrade.com/what-we-offer/pricing-and-rates and https://www.tdameritrade.com/pricing.page I'd go with US based TastyTrade (https://www.tastyworks.com/pricing.html) who charge $2.50. Closing the trade costs $0.00 (in the case of writing options, this allows for cheaply buying back tail risk). Their TastyWorks platform is well thought-out and option-centric. Hope this works for you, good luck!
    • CG
      Chris G.
      17 September 2019 @ 11:05
      GEZ20 does not appear to be tradeable through TD Ameritrade ThinkOrSwim platform
  • SS
    S S.
    30 July 2019 @ 18:36
    Why would you have a strike of 99 and not 98.5-98.625
    • JL
      Jose L.
      24 August 2019 @ 20:50
      I checked the strikes - BUD and TAP have $0.50, SAM has $10 and BREW has $2.50 increments - in short none are priced in /8 increments.
    • JL
      Jose L.
      24 August 2019 @ 20:52
      Sorry guys, posting this to the wrong strand - should have been the pairs trades on BUD/TAP & SAM/BREW
  • KL
    Kerrie L.
    24 August 2019 @ 01:22
    Can anyone recommend the easiest online platform to do this trade? Preferably with knowledgeable customer support. I was considering E Trade.
  • EA
    Emma A.
    21 August 2019 @ 04:57
    I don't understand this trade if you are betting on a crisis. LIBOR tracks the FFR when things are calm, but they diverged a lot during the GFC. Why wouldn't they do so again? Or are you just planning to hold through all the volatility?
  • ID
    Imran D.
    16 August 2019 @ 15:13
    Anyone have analysis to share on trading the ED vs the 2 year (a point I've found is the ED can diverge greatly from the fed funds, as it did in GFC), and also on the futures outright vs options? Also on trading the long end vs the short end, as the long end has moved so much more so far?
  • Hv
    Hannah v.
    30 July 2019 @ 04:58
    Hi Folks, Does anyone know of a Canadian Brokerage with whom I can place this trade? I’m in B.C. (western Canada.) Thanks in advance! Hannah
    • Hv
      Hannah v.
      30 July 2019 @ 05:40
      I’m with Interactive Brokers and Questrade at the moment..
    • RS
      Richard S.
      5 August 2019 @ 21:04
      IB have the eurodollar futures. Just call them to allow you to trade them.
    • MS
      Malcolm S.
      7 August 2019 @ 20:46
      I can't find them on Questrade. If I cannot find them in time, I am just going to buy gold and silver leveraged ETFs.
  • JO
    Johnny O.
    6 August 2019 @ 09:13
    I'm still missing something. Is LIBOR going to crash more than other bond yields? Every time I look at the moves in Eurodollar futures, they are very modest moves and much smaller than the equivalent moves in Treasury bonds or Zeroes in the same periods. So there must be something more: is it an expected critical shortage of offshore USD; is it that /GE futures are cheaper and you can buy more of them at the same delta; or is it some technical play involving buying the forward strips? I've added Eurodollar futures to my IB account, but see more juice in options on Treasury Bond /ZB futures that I can already trade on better platforms.
  • TR
    Thomas R.
    29 July 2019 @ 17:37
    I can't find an ETF or even a certificate to go long these eurodollar futures. Is There anything with an ISIN?
    • AP
      Ash P.
      30 July 2019 @ 19:49
      There are ETNs - long (ULBR) and short (DLBR) - the equivalent vanilla bet using these would be to buy ULBR - but of course, you're not getting the leverage options provide (these ETNs don't appear to be optionable).
    • EL
      Eric L.
      6 August 2019 @ 01:56
      I believe you want to buy (DLBR), not (ULBR).
  • JD
    Jeff D.
    30 July 2019 @ 01:16
    THIS IS EXACTLY HOW TO DO THE TRADE: You want to buy CALLs on /GEZ19 Safe trade: Strike price 98.5 with around 400 days till expiration (costs about $500 per contract) Risk-on trade: Strike price 98.75 with around 320 days till expiration (costs around $350 per contract) You could buy less time, if you know how to trade in and out on the way up...extra risky, but more profitable. Get in ASAP, and close the trade when the FED funds rate = 0 These option prices move fast, and you want a good entry point. Today is a good day to get in. Remember these options cut-both-ways. Big gains on up days. Savage losses on down days. Don't freak out, and don't get greedy. This is a great trade. I expect to make 10X this year. I recommend Tastyworks for trading options, they make it super easy, but any brokerage can do this trade. (Maybe not Robinhood) You need futures trading permission to do this trade. It is separate from margin and options trading permission. You can't even buy CALLs on futures without getting permission. Call your broker and they will help you find the online "enable futures" button / process. Go to younghustler.com for more information on how options work, and videos on how to set up an account with Tastyworks. Godspeed.
    • SS
      S S.
      30 July 2019 @ 10:49
      GEZ19? Are you sure you don’t mean GEZ20? To my knowledge Raoul recommends to buy Dec 2020 calls, what strike price for that?
    • JH
      Joel H.
      6 August 2019 @ 01:00
      nice, thanks!
  • JH
    Joel H.
    6 August 2019 @ 00:54
    great video, thx guys
  • HM
    Hamed M.
    1 August 2019 @ 12:31
    And what if the spread between 3ML and EFFR goes up?
    • AY
      Adam Y.
      5 August 2019 @ 20:29
      What would drive that out of interest? Perceived credit risk on banks?
  • MF
    Marc F.
    5 August 2019 @ 14:41
    He is wrong on his analysis, Interest Rates are not going to zero. They will break out in 2020 / 2021
  • SS
    S S.
    29 July 2019 @ 20:33
    For Eurodollar call options, What Month, Dec 2020 or Dec 21 and what strike price is recommended by the pros such as John Burbank and Raoul
    • ks
      karamjit s.
      5 August 2019 @ 04:23
      Raoul is buying the $99 Dec. 2020 strikes. They’re moving fast
  • PC
    Philip C.
    30 July 2019 @ 08:14
    Disagree with trade setup. Implied vol is not being considered appropriately. EDZ0 call 99 strike is trading at IVB 56 (~13 delta). Same delta puts are trading @ 25 IVB. Skew is v rich. Relative to historical, 56 IV is pricing 3.5% daily vol which normalized gives you about the ~3.44. Yes, implied typically trades fat v realised but this is extreme. See linked pictures for visualisations: https://i.imgur.com/HOW5GF1.gif https://i.imgur.com/bmSNsXF.gif
    • PC
      Philip C.
      30 July 2019 @ 08:22
      FWIW, I agree with the fundamental view and this trade has a nice rho profile/ when rates fall IV spikes but expression via naked calls is inefficent. Bet money if Burbank is actaully doing this trade it's via a call/ ratio spread. Pls read the vol bible (Option Volatility & Pricing: Advanced Trading Strategies and Techniques by Sheldon Natenberg) before trading options.
    • WM
      Will M.
      1 August 2019 @ 19:29
      I notice Phillip C you dissed the trade set up expertly, but choose not to offer a better one for RVT viewers to consider.
  • SG
    Sven G.
    30 July 2019 @ 18:00
    this guys videos are terrible... like if TMZ tried to make financial content.
    • SH
      Sebastian H.
      31 July 2019 @ 03:05
      Or even Buzzfeed lol
  • SS
    Shanthi S.
    30 July 2019 @ 11:05
    Thanks A.K. Very helpful 👍
  • YL
    Yongzhao L.
    30 July 2019 @ 04:11
    Minimum contract size for a Eurodollar contact is $244K.....what about us retail investors? What can we do here to express the trade idea???
    • DS
      Dan S.
      30 July 2019 @ 07:59
      I think the idea is to buy call options on a Eurodollar contract as outlined by Jeff D below
    • DS
      Dan S.
      30 July 2019 @ 08:10
      I just bought a couple of Call options in my Interactive Brokers account on the December 2020 GE with September expiration (around 400 days) at strike price of 98.5 at $565 per contract. I basically put this small position on to learn and get a feel and understanding for it. If anyone has any suggestions on whether this looks right or if I went wrong somewhere I would appreciate it :)
  • JB
    Jon B.
    29 July 2019 @ 15:22
    Aha. Another piece of the jigsaw falls into place
    • JB
      Jon B.
      29 July 2019 @ 16:13
      So now I understand the reason WHY these traders at barclays wanted to fix the libor rate.... https://www.investopedia.com/terms/l/libor-scandal.asp
  • DS
    David S.
    29 July 2019 @ 13:49
    Well done AK. Many subscribers asked to see the Eurodollar trade and you showed it to them. You also gave them all the appropriate caveats to let investors know that this is deep end of the pool. DLS