Late SOFR/Treasury Option Roundup: Dec Rate Cut Hedge

Carry-over upside SOFR call trade from Wednesday generated decent volumes Thursday even as underlying futures pared some of yesterday's gains. Salient trade: a buyer of 100,000 Dec'23 SOFR call spreads looking for a 25bp rate cut by year end. Rate hike projections through year end are gaining as short end trades weaker, Sep 20 FOMC is 17% w/ implied rate change of +4.3bp to 5.371%. November cumulative of +13.2bp at 5.460, December cumulative of 11.6bp at 5.445%. Fed terminal up to 5.460% in Nov'23.

• SOFR Options:
  • +100,000 SFRZ3 94.75/94.87 call spds, 1.0-1.25, mostly 1.25 outright
  • +4,000 SFRH4 94.75/95.00/95.25/95.50 call condor 1.0 over SFRH4 94.12/94.25 put spd
  • +15,000 SFRM4 97.00/97.50 call spds, 3.25 ref 95.03
  • 2,000 0QU3 96.00/96.50 call spds vs. SFRV3 93.87/94.37/94.50 broken put flys
  • 4,000 0QZ3 96.00/96.25/96.50 call flys ref 95.735
  • 4,500 SFRM3 95.75/97.00 2x3 call spds ref 95.07
  • 3,200 SFRZ3 94.68/94.81/94.93 call flys ref 94.58
  • 2,100 SFRZ3 94.93 calls ref 94.58
• Treasury Options: Reminder, Sep'23 options expire Friday -- unwinds making up much of today's volume.
  • 2,000 TYU3 110.5/111 1x2 call spds
  • over 28,800 TYU3 110 calls 6-7 after trading as high as 17
  • 3,000 TYV3 111.5/112 call spds, 8 ref 110-06
  • Block, +11,000 TYZ3 106 puts, 27 vs. 109-21/0.17%
  • 2,000 TYU3 108/108.5/109 put flys ref 109-26.5
  • 3,100 TYX3 112 calls, 45 ref 110-11.5
  • 14,300 TYU3 109.5 puts, 11
  • 19,400 TYU3 109 puts, 3-4
  • 13,900 TYU3 108.5 puts, 2
  • 4,800 TYU3 108 puts, 1