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

US TSYS

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
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