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Eurodollar/SOFR/Tsy Option Roundup

US TSYS
Aside from a massive conversion strip in Eurodollar options, FI option trade revolved around puts and put spreads ahead of Friday's May CPI.
  • Eurodollar option volume will see a massive jump in open interest, 720,000 to be exact after 90,000 conversion strips traded early in the first half: 90,000 in each of the Dec'22/Mar'23/Jun'23 97.00 conversion w/ Jun'23 97.50 conversion, 4.75 total/package. While large, the structure most likely involving one large account lending to another for the duration of the trade.
  • Other Eurodollar trade included 17,200 short Aug 96.25 puts, 13.0-12.5 and 4,300 Blue Jun 96.75 puts, 0.5.
  • 5Y Tactical Play For Stronger Than Expected CPI. Paper bought +10,000 wk2 5Y 111/111.25 put spds, 1.5 vs. 111-24.5/0.05%, a relatively cheap data hedge, but with markets anticipating 0.7% CPI, the actual number would have to be greater than that for the put spd to go bid.
  • Early profit taking/unwind in 5Y options when underlying was trading near lows: paper sold -11,000 FVN 111.111.5 put spds, 10 ref 111-21.75 as well as -6,000 FVN 111.5/112 put spds.
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