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Early SOFR/Treasury Option Roundup, Continued Rate Cut Positioning

US TSYS

Decent SOFR option volumes again overnight, continued call structure/rate cut positioning ahead this morning's headline CPI and tomorrow's PPI measures for December. Projected rate cuts for early 2024 gaining slightly: January 2024 cumulative -0.6bp at 5.323%, March 2024 chance of rate cut -68.8% vs. -64.0% late Wednesday w/ cumulative of -17.8bp at 5.150%, May 2024 chance of cut 92.1% vs. 90.9% late Wednesday, cumulative -40.9bp at 4.920%. Fed terminal at 5.330% in Jan'24.

  • SOFR Options: Reminder, January options expire tomorrow
    • 2,500 SFRM4 95.62/96.12/96.50 call flys
    • 8,000 SFRU4 95.75/95.87 call spds vs. 95.18/95.31 put spds
    • Block, 4,000 0QG 96.37/96.62 call spds 9.0 over 0QG4 95.37/95.62 put spds
    • Block, +35,000 0QG 96.50/96.75 call spds 6.5 over 0QG4 95.50/95.75 put spds vs. SFRH5 96.41/0.20%
    • 16,000 SFRG4 95.00/95.06 call spds ref 94.93
    • 16,000 SFRF4 94.93/95.00 1x2 call spds ref 94.93
    • Blocks, +17,000 SFRH4 95.06/95.12 call spds ref 94.93
    • 2,500 SFRM4 95.62/95.87 call spds ref 95.37
    • 2,500 SFRU4 97.00/98.00 2x3 call spds ref 95.745
    • 2,000 SFRJ4 95.75/96.25 call spds ref 95.36
    • 2,000 SFRJ4 95.37/95.62/95.87 call trees
  • Treasury Options:
    • 2,500 TYG4 111/112.5 call spds over TYG4 110/111 put spds
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