Late SOFR/Treasury Option Roundup: Adjusting to Drop in Rate Cut Odds

SOFR and Treasury option remained mixed on heavy volume Friday, accounts adjusting positions after an unexpected surge in January jobs: +353k vs 185k est (prior up-revised to 333k from 216k), Private Payrolls surge to +317k vs. 170k est. SOFR futures gapped lower (SFRH4-SFRZ4 -0.080-0.210) while projected rate cut chances retreated: March 2024 chance of 25bp rate cut currently -22.2% vs. -38.7% pre-data w/ cumulative of -5.6bp at 5.263%, May 2024 at -70.6% vs. -90.8% w/ cumulative -23.2bp at 5.087%, while June 2024 at retreated to -87.9% vs. 105% w/ cumulative -45.2bp at 4.867%. Fed terminal at 5.3175% in Feb'24. Salient trade includes:

• SOFR Options:
  • Block, 20,000 SFRU4 95.31/95.43 call spds, 6.5 ref 95.59
  • Block, 10,000 SFRU4 94.93/95.37/95.43/95.68 broken put condors, 1.0 net - belly over
  • Block, 10,000 SFRM4 95.31/95.43/95.56/95.68 call condors, 1.25
  • Block, 5,000 SFRH4 95.50 calls, 1.25 ref 94.795/0.09%
  • Block, 5,000 SFRM4 95.37/96.00 call spds, 8.0 ref 95.20
  • Block, 5,000 SFRH4 95.00/95.06/95.12 call flys, 0.25 ref 94.795
  • +9,000 SFRH4 95.00 calls, 2.5 ref 94.81/0.10%
  • Block, 20,000 SFRH4 94.87/95.00/95.12/95.25 call condors, 0.75
• Treasury Options:
  • +10,000 FVH4 106 puts, 2.5
  • 10,000 TYH4 111.5 puts, 43.0, total volume on nay over 98k
  • Block, 10,500 TYM4 111 puts, 105 vs. 111-19/0.16%
  • 8,400 TYH4 112.5/113.5 1x2 call spds, 2 ref 111-20.5
  • -2,900 TYM4 112 straddles, 318 ref 112-08.5
  • 6,000 FVH4/wk2 FV 108.5 straddle spds
  • 1,800 FVH4 106.75/107.5/108.25 2x3x1 put flys ref 107-31.5
  • 2,300 TYH4 109.5/110.5/111.5 put flys, 10 ref 111-27.5