Early SOFR/Treasury Option Roundup

Mixed option flow overnight, SOFR includes better upside calls for the third day running (chunky buying in Jun'24 call flys and Sep'24 call condor hedging for rate cut), while Treasury options include modest 5- and 10Y puts. Underlying futures modestly higher after yesterday's reversal, futures still near the middle of last 8 day range.

• Projected rate cut pricing looking steady to mildly higher at midyear vs. late Tuesday read: March 2024 chance of 25bp rate cut currently -2.7% w/ cumulative of -0.07bp at 5.322%; May 2024 at -18.4% vs. -16.4% late Tuesday w/ cumulative -5.3bp at 5.276%; June 2024 -54.5% from -52% late Tue w/ cumulative cut -18.9bp at 5.140%. First full cut priced in at July w/cumulative -32.1bp at 5.008%. Fed terminal at 5.327% in Mar'24.
• SOFR Options:
  • 2,500 0QH4 96.12/96.25 2x3 call spds ref 95.75 to -.745
  • 2,500 SFRM4 95.25/95.50/95.75/96.50 1x3x4x3 broken call condor ref 94.87
  • +5,750 SFRZ4 95.50/95.18 put spds 3x vs SFRZ4 96.00/96.75 call spds 1x 36.0 net db
  • +5,000 SFRJ4 94.75/94.87/94.93/95.18 call condor 2.5
• Treasury Options:
  • 8,800 FVM4 104 puts ref 106-25.75
  • -5,000 TYM4 108 puts 44
  • -5,000 TYJ4 110/111 strangles 108