Early SOFR/Treasury Option Roundup: Better Calls Ahead PPI

SOFR options continue to revolve around call structure/rate cut positioning in the lead-up to this morning's PPI data. Overall volumes slightly less than earlier in the week, Treasury options muted as well. Underlying futures weaker but off lows, 10Y yield just below 4.0 at 3.9956% (+.0297). Projected rate cuts for early 2024 looking steady to slightly higher: January 2024 cumulative -1.1bp at 5.318%, March 2024 chance of rate cut -71.6% vs. -68.8% late Thursday w/ cumulative of -19.0bp at 5.138%, May 2024 chance of cut 97.6% vs. 96.9% late Thursday, cumulative -43.4bp at 4.894%. June 2024 back to fully pricing in the first 25bp cut w/ cumulative -70.3bp at 4.626%. Fed terminal at 5.315% in Feb'24.

• SOFR Options: Jan options expire today
  • 5,000 SFRU4 95.87/96.37/96.62/96.87 call condors
  • 5,000 SFRG4 95.12/95.25/95.50 call trees ref 94.955
  • Blocks, 12,000 0QM4 96.75/97.25/97.75 call flys 3.5 over 0QM4 95.75/96.00 put spds
  • 3,000 SFRM4 95.25/95.50/95.75 call flys
  • 15,000 0QH4 96.75/97.00 call spds ref 96.49
  • 6,000 2QH4 97.12/97.50 call spds
  • 3,000 SFRH4 95.12 calls ref 94.96 to -.955
  • 2,000 SFRM4 95.06/95.18 put spds ref 95.445/0.09%
  • 1,500 0QF4 96.62/96.75 call spds ref 96.49/0.10%
  • 2,000 SFRM4 95.50/95.75/96.00/96.12 broken call condors ref 95.425
  • 2,000 SFRH4 94.81/SFRJ4 94.93 put spds
  • 15,000 0QH4 96.75/97.25 call spds
• Treasury Options:
  • 1,000 FVH4 104.75/105.25/106.25 put flys
  • 1,500 TYG4 113/114 call spds vs. TYG4 110/111 put spds ref 112-10.5