Update 2 Re: 30 Day Fed Funds

By: Patrice Johnson | Sun, Sep 28, 2008
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9/28/2008 5:43:43 PM

Greetings, J.E.D.I.

Welcome to The J.E.D.I. Way.

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This e-mail is to alert you that we received a fill on the October 2008 Futures Options Spread of the 30 Day Fed Funds at our limit price of $.035 (.03 for the put option and .005 for the call option). However we did not receive a fill for the December 2008, and January 2009 Futures Options Spread on the 30 Day Fed Funds. Thus we will re-enter our order for the 30 Day Fed Funds futures options spread for December 2008 and January 2009 as follows:

(1) Buy to open one (1) 30 Day Fed Funds December 2008 98.50 Call Option (Ticker Symbol: FFZ898.50C) and one (1) 30 Day Fed Funds December 2008 98.00 Put Option (Ticker Symbol: FFZ898P) at a limit price of $0.035 good for the day (.005 for the call option and .03 for the put option)

(2) Buy to open one (1) 30 Day Fed Funds January 2009 98.50 Call Option (Ticker Symbol: FFF998.50C) and one (1) 30 Day Fed Funds January 2009 98 Put Option (Ticker Symbol: FFF998P) at a limit price of $0.035 good for the day (.005 for the call option and .03 for the put option)

Estimated Commission: $103.92 ($25.98 for each spread/straddle order (or $25.98x4 - October 2008, November 2008, December 2008, and January 2009))
Estimated Order Total (If all four orders(oct08, nov08, dec08, jan09) are filled): $647.44 ($543.52 + $103.92 commissions)

Contract Specifications: FF, CBOT

Trading Unit:   5 million
Tick Size:   $20.835 per 1/2 of one basis point
Quoted Units:   100 - the avg daily fed funds overnight rate
Initial Margin For Futures Contract :   $1,148 Maint Margin for Futures Contract: $850
Contract Months:   All 12 months.
First Notice Day:   Cash settled.
Last Trading Day:   Last business day of the delivery month.
Trading Hours:   Open Outcry: 7:20 a.m. - 2:00 p.m. Chicago time, Mon-Fri.
Trading in expiring contracts closes at 2:00 p.m. Chicago time on the last trading day.
Daily Limit:   none

My fellow J.E.D.I.,

I am expecting some volatility on the options on the 30 Day Fed Funds contracts between now and December 2008. While I do not expect the Chairman of the Federal Reserve, Ben Bernanke, to change interest rates, either up or down, between now and December 2008, I believe that the 30 Day Fed Funds will be indirectly effected by the events and activity taking place and scheduled to take place down the road. We have not seen volatility on the 30 Day Fed Funds for a while. I personally think that the 30 Day Fed Funds is long overdue for some volatility especially given the events and upcoming events. Thus I believe it is imporant to be involved in the 30 Day Fed Funds options.

And the best way I believe to be involved in the 30 Day Fed Funds is by straddling the 30 Day Fed Funds Options for September 2008 (filled 9/4/08), October 2008 (filled 9/22/08), November 2008 (filled 9/23/08), December 2008 and January 2009 and future months. We have received fill for the September 2008 straddle, October 2008 Straddle and the November 2008 straddle. We will put in an order to straddle the December 2008, and January 2009 30 Day Fed Funds Options Contract as indicated above.

Assuming we receive a fill for all four (4) straddles (or spread) contracts months (October 2008, November 2008, December 2008 and January 2009) on our straddle orders, if nothing happens on the 30 Day Fed Funds for these months our maximum loss on our trades is $647.44 (only if all contracts expire worthless).

Those who participated in the September 2008 30 Day Fed Funds September 98 Call Option realized a gain of $658.94 on Friday, September 26, 2008 when we sold it for $.1750 after we purchased it for $.01. And has therefore covered their total cost for doing the straddles (or spreads) for the months of September 2008, October 2008, November 2008, December 2008 and January 2009 on the 30 Day Fed Funds.

NOTE: The September 2008 98 Put option expires on Tuesday, September 30, 2008. Therefore in addition to doing a straddle on the 30 Day Fed Funds for the months of December 2008 and January 2009, mentioned above, we may want to make sure to close out our 30 Day Fed Funds September 2008 98.00 PUT position before it expires on Tuesday, September 30, 2008 otherwise we may get exercised into a futures position particularly if the 30 Day Fed Funds September 2008 Futures Price closes at or below 98.00 at expiration in which case we may end up getting excercised and being short one 30 Day Fed Fund September 2008 futures at 98.00. Our goal will be to exit the 30 Day Fed Funds September 2008 98 Put Option before expiration on Tuesday, September 30, 2008. Thus, we will enter an order to sell to close one (1) 30 Day Fed Funds September 2008 98 Put at a limit price of $.0125 for tomorrow, Monday, September 30, 2008.

The last price for the 30 Day Fed Funds September 2008 98 Put Option was $.003.
Current asking price is $.013 for the 30 Day Fed Funds September 2008 Put Option.
Note: The curent asking price for the 30 Day Fed Funds September 2008 Put Option of $.013 may signify that the majority will vote "No" to the "Rescue Bill", tomorrow, or it could signify that there will be more delays with getting a "Rescue Bill" passed through congress or neither.
The last price for the 30 Day Fed Funds September 2008 Futures was $98.19.

Good Luck!

And may the force of volatility will be with you.

Best Regards,

 


 

Patrice Johnson

Author: Patrice Johnson

Patrice V. Johnson
The J.E.D.I Way

Patrice V. Johnson

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