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Late SOFR/Treasury Option Roundup

US TSYS

SOFR and Treasury option trade remained mixed Monday as call buyers looking to hedge the first rate cut at the June FOMC resumed after better put buying in early trade. Overall volumes relatively modest as traders appear cautious in committing capital ahead this week's data (NFP Friday) and Fed Chairman Powell's semi-annual policy testimony to Congress on Wed-Thu.

  • Projected rate cut pricing have receded from late Friday levels: March 2024 chance of 25bp rate cut currently -2.3% w/ cumulative of -0.6bp at 5.323%; May 2024 at -18.6% vs. -24.8% late Friday w/ cumulative -5.2bp at 5.276%; June 2024 -57.4% from -67.9% late Friday w/ cumulative cut -19.6bp at 5.133%. July'24 cumulative -33.3bp at 4.993%. Salient SOFR and Treasury option trades include:
  • SOFR Options:
    • Front Dec put vs. Red Dec'25 put sprd package: 2.5 net/front Dec 2.5 over
    • Block, total 26,000 SFRZ4 94.75 puts vs. 95.52/0.16% vs.
    • Block, total 26,000 SFRZ5 94.00/94.75 put spds, 9.0 vs. 96.325/0.08%
    • +20,000 SFRM4 94.81/94.87/94.93/95.00 call condors, 1.25 ref 94.90
    • -20,000 SRZ4 95.00/95.50/96.00 put flys 11.5 ref 95.51
    • Block, total +10,000 SFRM4 94.81/94.93 put spds vs. SFRU4 94.87/95.00 put spds, 1.5 net/Jun over
    • +4,000 SRM4 96.00 calls vs. 94.12/94.62 put spds, 0.25 net vs 94.92/0.19/%
    • -3,000 SRU4 94.25/94.62 put spds 3.0 ref 95.23
    • +8,000 SRM4 94.81/94.93/95.00 1x3x2 call flys 2.0 ref 94.92
    • Block, 5,000 SFRM4 95.00/95.25/95.50/95.75 call condors, 4.0 ref 94.935
    • 2,000 SFRZ4 94.56/94.68/94.81 put flys, ref 95.575
    • Block, +2,500 SFRM4 95.75/96.37 call spds 1.25 ref 94.96
    • +8,000 SFRM4 94.75/94.87 put spds vs. 95.12/95.37 call spds ref 94.94, 1.75 net/put spd over
    • Block, +3,000 SFRM5 96.37/97.37 call spds, 26.5 ref 96.13
    • 2,000 SFRM4 95.75/96.37 call spds ref 94.945
    • Block, 2,500 SFRU4 95.75 calls, 14.5 ref 95.265
    • 2,000 2QH4 96.12/96.37 put spds vs. 96.62 calls, ref 96.42
    • +4,000 0QH4 95.56/95.62 put spds, 1.5 ref 95.865
    • 2,000 SFRU4 94.87/95.12/95.73 broken call flys ref 95.25
  • Treasury Options:
    • over 6,400 FVM'24 110.5/111.25/112/112.75 call condors
    • 40,000 wk2/wk3 10Y 108.5/110 put spd spds - rolling out one wk/ 9 net db
    • 5,000 TYJ4 111/112 1x2 call spds, 4 net ref 110-23.5
    • 3,000 TYK4 116 calls, 6 ref 110-29
    • Block, 2,100 TYJ4 109.5/110.5 put spds vs. 112 calls, 0.0 ref 110-29.5
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