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Early SOFR/Treasury Option Roundup: March Repositioning

US TSYS

Heavier SOFR option volumes overnight: mixed trade, particularly in March as accounts adjust positions following yesterday's steady FOMC rate annc. While underlying futures extended highs well after the annc and Chair Powell's presser - focus on comment that March "unlikely" to see rate cut spurred a lot of call unwinds as projections moderated. Dealer calls: Barclays and GS both push first rate cut to May from Mar, BoA from March to June, while GS still est's 5 cuts in 2024.

  • Projected rate cut chances are higher but off post-FOMC highs: March 2024 chance of 25bp rate cut currently -36.8% vs. -63.5% post FOMC w/ cumulative of -9.2bp at 5.229%, May 2024 at -95.9% vs. -97.2% w/ cumulative -33.2bp at 4.990%, while June 2024 slips to 108.5% vs. -111.4% (-94.6% late Tuesday) w/ cumulative -60.3bp at 4.718%. Fed terminal at 5.32% in Feb'24.
  • SOFR Options:
    • Block, 7,500 SFRH4 94.75 puts vs. 95.00/95.12 call spds, 0.0 vs. 94.87/0.30% (more on screen)
    • Block, -6,000 SFRJ4 95.37/95.68/96.00 call flys, 4.5
    • 2,500 SFRK4 94.75/95.00 put spds 95.35
    • 5,500 SFRH4 94.93/95.18/95.43 call flys ref 94.87
    • 8,000 SFRH4 95.12/95.37 call spds, 0.75 ref 94.87
    • Block, 3,000 0QH4 96.00/96.25 put spds, 7.5
    • Block, 5,000 SFRH4 95.06/95.12 call spds 0.5 ref 94.87
    • Block, 5,000 SFRH4 94.75/94.81/94.87/94.93 put condors, 2.25 ref 94.87
    • 5,500 0QG4 96.00/96.25/96.37/96.50 broken put condors ref 96.445
    • 2,500 SFRH4 94.75/94.81 2x1 put spds ref 94.87
    • 4,000 SFRM4 94.75/95.00/95.50/95.75 1x2x2x1 call condor
    • Block, 2,500 SFRH4 94.87/94.93/95.00/95.06 call condors, 1.25 ref 94.88 (more on screen)
    • 4,300 0QH4 97.12/97.37 call spds ref 96.46
    • 1,000 SFRK4 95.56/95.62/95.68/95.75 call condors ref 95.36
    • Block, 2,750 0QG 96.12/96.25 put spds, 2.5 ref 96.46
    • Block, 4,500 SFRM4 95.43/0QM4 97.12 call spds, 1.0 net/midcurve over
    • 3,000 SFRJ4 95.00 puts ref 95.33
    • over 20,000 SFRH4 94.87/94.93/95.00 call flys
  • Treasury Options:
    • 5,000 FVH4 107.25/107.5 2x1 put spds
    • over 7,000 TYH4 109.5/111/112.5 put flys ref 112-14
    • 3,800 TYH4 115/116 call spds ref 112-12
    • 1,500 TYH4 112.5/113.5 1x2 call spds, 2 ref 112-14.5
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