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Late SOFR Option Roundup: Still Largely Bullish Despite CPI Tied Sell-Off

STIR

The bulk of Tuesday's post-CPI options trade looked bullish on the surface: fading the post data sell-off in underlying futures via upside call structure buying and put selling driven in good part by position unwinds so far.

  • Projected rate cut pricing continues to ebb: March 2024 chance of 25bp rate cut currently -10.6% (-18.3% late Monday) w/ cumulative of -2.6bp at 5.302%; May 2024 at -28.9% vs. -53.0% late Monday w/ cumulative cut of -9.9bp at 5.230%; June 2024 -57.7% vs. -80.3% late Monday w/ cumulative -24.3bp at 5.086%. Salient second half SOFR Options:
    • -40,000 SFRU4 96.50/98.00 call spds vs. 2QU4 97.00/97.37 call spd, 0.25 net flattener
    • Block, 15,000 SFRH4 94.93/95.37 call spds, 0.5 ref 94.72 to -.725
    • +15,000 SFRK4 95.00/95.06 call spds, 2.0 ref 94.97 to -.965
    • Block, 5,000 SFRM4 94.87/95.00/95.25/95.37 put condors, 4.5
    • +10,000 2QM4 97.25/98.25 call spds, 4.0 ref 96.34
    • Block, 15,000 SFRM4 94.62 puts, 3.25 ref 94.98
    • +10,000 0QH4 95.75/96.25 put over risk reversals, 1.5 vs. 95.94/0.50%
    • -9,000 SFRK4 94.87/95.06/95.25 put trees, 6.5 ref 94.99
    • -5,000 0QG4 95.87 puts, 3.0 ref 95.94
    • +5,000 SFRM4 94.87/94.93/95.06/95.12 call condors, 1.5 ref 94.99
    • -5,000 SFRK4 95.18/95.31 call spds vs. 95.50/95.75/95.87 call flys, 1.5 net
    • +10,000 SFRM/SFRN 94.50 put spds, 0.75
    • +4,000 SFRN4 94.50 puts, 2.5 ref 95.325
    • Block, +10,000 SFRM4 95.50/96.25 call spds, 3.75
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