Early SOFR/Treasury Option Roundup: Low Delta Put Positions Continues

SOFR and Treasury options continued to favor low delta puts, put structures overnight as option accts discount the rebound in underlying futures to Friday's pre-PPI levels, positioning for delayed rate cut expectations as the Fed waits for stronger/consistent signs inflation is at bay.

• Projected rate cut pricing near steady to late Tuesday levels: March 2024 chance of 25bp rate cut currently -9.6% vs. -10.6% lat e Tuesday w/ cumulative of -2.4bp at 5.305%; May 2024 at -30.0% vs. -28.9% w/ cumulative -9.9bp at 5.230%; June 2024 -64.9% vs. -65% w/ cumulative cut -26.1bp at 5.068%. Fed terminal at 5.33% in Feb'24
• SOFR Options:
  • -7,500 SFRM4 96.00/97.00 call spds 1.5
  • 3,500 SFRZ4 98.00/98.25/98.50/99.00 call condors ref 95.64
  • 3,000 SFRK4 95.00/95.12 put spds
  • 2,000 SFRK4 94.87/95.00/95.12 put trees ref 98.98
  • Block 8,000 SFRM4 94.81/94.93/95.00/95.12 call condors, 3.25 ref 94.98
  • 7,000 SFRH4 94.75/94.81/94.87 put flys ref 94.7155
  • -4,000 SFRU4 95.00/95.12 put spds, 5.0 ref 95.315
  • 4,000 SFRM4 95.00 puts ref 94.98
  • +2,500 SFRM4 94.87/94.93/95.00/95.06 put condors, 1.25
  • Block, +4,500 SFRM4 94.62/94.87/95.00/95.12 broken put condors, 0.75 net vs. 94.985/0.12%
  • 1,500 SFRH4 97.50/98.25/99.00 call flys ref 94.7125
• Treasury Options:
  • +4,750 TYH4 111 combo, 62 net/put over vs. 110-01/100%
  • -3,000 TYH4 108.75/109.5/110.5 broken put trees, 32 vs. 109-30.5/0.50%
  • +2,500 TYJ4 107.5/110 put spds vs. TYJ4 113 calls, 22 net ref 110-15.5