Late SOFR/Treasury Option Roundup: Calls Were Right

SOFR option trade continued to revolve around rate cut insurance via upside calls - apt given the market rally that followed the Fed's latest steady policy annc where they acknowledged inflation has eased though reminding the Fed is "prepared to tighten policy further, if appropriate". Projected rate cuts for early 2024 gained momentum: January 2024 cumulative -2.5bp at 5.307%, March 2024 chance of rate cut climbs to -62% vs. -41.6% this morning w/ cumulative of -18bp at 5.153%, May 2024 up to -79.2% vs. -59.3% this morning, cumulative -37.7bp at 4.956%, June'24 at -89.2% with cumulative at -60.6bp at 4.726%. Fed terminal at 5.33% in Feb'24.

• SOFR Options: Reminder, Dec'24 options expire Friday
  • over 21,000 SFRZ3 94.62 calls, 0.5
  • 2,500 SFRJ4 94.50/94.75/95.00 put flys, 3.0 ref 95.35
  • Blocks, total +45,000 SFRM4 96.12 calls, 8.5 vs. 95.14/0.17%
  • 5,000 SFRM4 96.25 calls, 7.5 ref 95.15
  • +15,000 SFRF4 94.87/95.00/95.06 call flys, 2.0
  • +5,000 SFRJ4 95.25/95.56/95.68 call flys 1.25 over SFRJ4 94.62 puts vs. 95.14/0.20%
  • +2,500 SFRM4 95.00/95.50/95.75 broken call flys, 12.75
  • +2,500 SFRU4 96.00/96.50/97.00/97.50 call condors, 5.75
  • +1,000 SFRH4 94.68/94.81/94.93 call flys ref 94.795
  • +1,000 SFRH4 94.75/94.87/95.00 call flys, 1.5 ref 94.80
  • +3,000 SFRH4 94.75/94.87/95.00 call flys .5 over SFRH4 94.37 puts
  • 2,500 0QZ3 95.62/95.87 put spds ref 95.77
  • 1,500 0QZ3 95.87 calls ref 95.87
  • 5,000 SFRH4 95.00/95.25/95.43 broken call flys ref 94.805
  • Block, 3,000 SFRZ3 94.62/94.68 call spds, cab
  • 1,000 SFRF4 94.68/94.75/94.81/94.87 call condors ref 94.795
• Treasury Options:
  • 4,000 TYF4 111.5 calls, 22 ref 110-27
  • +15,350 TYG4 109/110.5 2x1 put spds, 9 ref 110-27.5
  • 1,600 TYG4 109/111 3x2 put spds
  • 8,100 Wed wkly 5Y 107 puts, 5.5 ref 107-07
  • -5,000 wk5 TY 110.75 straddles, 125 ref 110-24.5
  • +9,000 wk5 TY 109/110 put spds, 15 (expires Dec 29).
  • (Yesterday, paper bought 10,000 wk5 TY 109 puts at 17 ref 110-21.)
  • +3,000 TYG4 112/114.5 1x2 call spds, 16
  • -4,500 TYF4 108.5/110 put spds, 17 vs. 110-21.5/0.25%
  • 5,000 TYF4 111.25 calls, 23 ref 110-21
  • 1,300 Wed wkly 110.25 puts, 6 ref 110-20
  • 2,000 Wed wkly 109.75 puts, 1 (expire today)