After another extremely quiet day yesterday, price action overnight has the feel of the usual European panic that we have seen so many times in the past 2 years. The Euro is back below 1.22, Italian and Spanish sovereign 10 year yields are both up more than 10 bps, with Spanish yields near new highs, European banks are down 3.5%, and the EuroStoxx index is down 1.5% (led by Italy and Spain down more than 3%). Though there is little news, the stresses in the banking system persist, and manifest themselves periodically on days like today.
Perhaps more importantly for the global stimulus story, the Xinhua News Agency in China reported last night that China won’t relax property curbs and still intends to prevent a rebound in the housing market. The Shanghai index is still hovering near 4 year lows, down 0.75% overnight. Crude and copper are also down about 2%.
Given that today is expiry, the closest SPY strike with the most open interest is 137, which can sometimes act as a magnet on an expiry day. SPY is currently trading at 136.97, so 137 might indeed be a pin by the close today. My only July position that is In-the-Money (JPM and CHK ending out-of-the-money) is SLV Jul 27 puts, and SLV is currently trading 26.15 in pre-market, so might be able to salvage that for close to no loss today. We also have the PHM Jul 10/12 call spread that we’re short expiring today, which we will also unwind by the close.